You are required to set up a scheme if you are an employer or employee anyone classed as a worker.
What is a worker?
A worker is defined as any individual who:
- Works under a contract of employment (an employee), or
- Has a contract to perform work on services personally and is not undertaking the work as part of their own business.
For example, agency workers may have such a contract. Even if the location of your company (the employer) is outside the UK, you will still have to comply with the legislation.
Do not rely solely on a person’s tax status assessed by HMRC as they may still be classed as a ‘worker’ under the new employer duties legislation.
What if you are a director?
Directors- If an individual is a director of a company and the company has no other employees, that individual is not a worker by virtue of any office that they hold or contract of employment under which they work. The company is therefore not subject to the employer duties in relation to that individual.
Similarly, if the company has more than one director, none of whom have a contract of employment with the company, none of the directors are, classed as a worker and the company is not subject to employer duties in relation to those directors. But if two or more directors have a contract of employment with the company, those directors will become workers.
Where the company takes on one or more workers in addition to the directors, the company will have employer duties in relation to those workers, but will not have duties in relation to any of the directors unless the directors have contracts of employment with the company.
Worker categories
Now the next step is to identify the category of each of your workers. It is only in respect of certain types of workers that an employer will have duties.
There are two main categories of worker for which the employer duties apply:
- Jobholders (eligible jobholders and non-eligible jobholders)
- Entitled workers.
The duties are different for each of these categories and are described below in
Employer duties and safeguards.
The category into which a worker falls is determined by their age and whether they earn qualifying earnings
So what determines a worker category?
Eligible jobholders
Are workers who:
- Are aged at least 22 but under state pension age
- Are working or ordinarily work in the UK under their contract
- Have qualifying earnings payable by the employer in the relevant pay reference period that are above the earnings trigger for automatic enrolment.
They are called this because they are ‘eligible’ for automatic enrolment.
Non-eligible jobholders
Are workers who:
- Are aged between 16 and 74
- Are working or ordinarily work in the UK under their contract
- Have qualifying earnings payable by the employer in the relevant pay reference period but below the earnings trigger for automatic enrolment.
Or
- Are aged between16 and 21, or state pension age and 74
- Are working or ordinarily work in the UK under their contract
- Have qualifying earnings payable by the employer in the relevant pay reference period that are above the earnings trigger for automatic enrolment.
They are called this because they are not eligible for automatic enrolment but can choose to opt in to a pension scheme.
Entitled workers
Are workers who:
- Are aged between 16 and 74
- Are working or ordinarily work in the UK under their contract
- Do not have qualifying earnings payable by the employer in the relevant pay reference period.
They are called this because they are ‘entitled’ to join a pension scheme.
Here is a quite summary of worker category
| Earnings | Age (inclusive) | ||
| 16-21 | 22- | -74 | |
| Lower earnings threshold of below | Entitled worker | ||
| More than lower earnings threshold up to and including the earnings trigger for automatic enrolment | Non-eligible jobholder | ||
| Over earnings trigger for automatic enrolment | Non-eligible jobholder | Eligible jobholder | Non-eligible jobholder |
State pension age
So now you have assessed your staff, what are your employer duties and safeguards.
All employers with at least one worker, regardless of their age or earnings, must:
- Declare their compliance with The Pensions regulator. This is an online process. You can find out more about it at: tpr.gov.uk/dec-compliance
- Adhere to the safeguards.
Eligible jobholder
The eligible jobholder may choose to opt out of a scheme membership once they have been automatically enrolled. ’opting out’ has a specific meaning in the new employer duties. It refers to the provision of a mechanism under the law which has the effect of undoing active membership, as if the worker had never been a member of a scheme on that occasion. It can only happen within a specific time period known as the ‘opt-out period’.
An employer will continue to have responsibilities towards the individual who has opted out. One of these is to automatically re-enrol them every three years, if they are still an eligible jobholder working for that employer. The employer must pay employer contributions to the scheme.
Non-eligible jobholders
Non-eligible jobholders do not meet the additional criteria to be eligible jobholders, so do not need to be automatically enrolled. However, they have a right to opt in to an automatic enrolment scheme, if they choose, so an employer still has duties in relation to them.
An employer must give their non-eligible jobholder certain information about both the right of a jobholder to opt in to an automatic enrolment scheme and the right of an entitled worker to join a pension scheme.
The employer must give this information to the non-eligible jobholder within six weeks of the earlier of the date on which they become a non-eligible jobholder or the date they become an entitled worker, e.g. the employers staging date or, if after staging, the non-eligible jobholders first day of employment.
This requirement does not apply if the employer has previously given this information, for example because the employer chose to use postponement in respect of the non-eligible jobholder and gave them a postponement notice.
If a non-eligible jobholder chooses to opt in to a pension scheme, they must do so by giving the employer an ‘opt-in notice’. On receipts of a valid pot-in notice, the employer must enrol the non-eligible jobholder into an automatic enrolment scheme by following the automatic enrolment process.
The employer must pay employer contributions to the scheme.
Entitled workers
Entitled workers do not need to be automatically enrolled. However, they do have a right to join a pension scheme. The pension scheme the employer chooses to use can be a different scheme to the one they may be using for automatic enrolment.
An employer must give their entitled workers certain information About both the right of a jobholder to opt in to an automatic enrolment scheme and the right of an entitled worker to join a pension scheme.
The employer must give this information to the entitled worker within six weeks of the staging date on which they become a non-eligible jobholder or the date they become an entitled worker, e.g. the employers staging date or, if after staging, the entitled worker’s first day of employment.
This requirement does not apply not apply if the employer has previously given this information for example because the employer chose to use postponement in respect of the entitled worker and gave them a postponement notice.
If an entitled worker chooses to join a pension scheme, they must do so by giving the employer a ‘joining notice’. The employer must then arrange membership of a scheme for them.
The employer will have to deduct contributions on behalf of the entitled worker and pay these into the scheme.
However, the employer does not have to pay into the scheme themselves, unless they choose to do so, or have chosen a scheme that requires an employer contribution.
Here is a quick summary of your duties for each of the different categories of workers and what the employer must do for each.
| Category of worker | What the employer has to do
|
|
| Eligible jobholder | · Automatically enrol
· Make ongoing employer contributions to the scheme |
|
| · Process any pot-out notice | ||
| · Automatically re-enrol approximately every three years or immediately if specific events caused active membership to cease | ||
| · Keep records of the automatic enrolment process | ||
| · If using postponement, give a notification to the eligible jobholder | ||
| Non-eligible jobholder
|
· Give information about the right of a jobholder to opt in and thr right of an entitled worker to join | |
| If the non-eligible jobholder decides to out in:
· Arrange pension scheme membership · Make ongoing employer contributions to the scheme |
||
| · Process any pot-out notice | ||
| · Keep records of the enrolment process | ||
| · Automatically re-enrol if specific events caused active membership to cease | ||
| Entitled worker | Give information about the right of a jobholder to opt in and the right of an entitled worker to join | |
| If the entitled worker decides to join, arrange pension scheme membership | ||
| Keep records of the joining process | ||
Safeguards for all workers
There are a number of safeguards in place to protect the rights of individuals to have access to pension saving. These apply to all workers, irrespective of their category, although as with the duties, different safeguards apply to different categories of workers.
The safeguards mean employers must ensure the following:
- They do not take any action or make any omission by which the eligible jobholder ceases to be an active member of the qualifying scheme.
- They do not take any action or make any omission by which the scheme ceases to be a qualifying scheme
- They do not take any action for the sole or main purpose of inducting a jobholder to opt out of a qualifying scheme, or a worker to give up membership of a pension scheme (this is known as ‘inducement’)
- During recruitment, they or their representatives do not ask any questions or make any statements that either states or implies that an applicant’s success will depend on whether they intend to opt out of the pension scheme (this is known as ‘prohibited recruitment conduct’)
- They do not breach employment rights for individuals not to be unfairly dismissed or suffer detriment on grounds related to the new employer duties.
The table below sets out the different categories of workers and illustrates what the employer must not do (including the safeguards) for each.
| Category of worker | Safeguards applicable |
| Eligible jobholder | All |
| Non-eligible jobholder | All |
| Entitled worker | · Inducement
· Prohibited recruitment conduct · Employment rights for individuals not to be unfairly dismissed or suffer detriment on grounds related to the new employer duties |
| Any other worker | · Prohibited recruitment conduct
· Employment rights for individuals not to be unfairly dismissed or suffer detriment on grounds related to the new employer duties |
So, now you have assessed your staff and set up your scheme what are the minimum contribution?
The table below shows the minimum contributions for employer/employee over the next few years:
| From | Employer | Employee |
| 2012-March 2018* | 1% | 0.8% |
| April 2018* -March 2019 | 2% | 2.4% |
| April 2019 | 3% | 4% |
*subject to parliament approval.
An employer/employee can pay more than the minimum contribution.
An employer can also choose to pay different contribution levels to different groups of staff.
For example:
| Administration staff | Management staff | Directors | |
| Employee | 1% | 4% | 0% |
| Employer | 1% | 8% | 15% |
As an employer you must be sure to meet the minimum contributions, as mentioned above.
The new employer duties affect every business in the UK and require each business, by law, to assess their workforce both initially and on an ongoing basis. All eligible employees must then be enrolled by the business into a qualifying workforce pension scheme. Failure to comply will result in business being fined.