Research indicates that people
working in the manufacturing sector
are more likely to join their company
pension schemes than in any other industry.
In fact nearly three quarters of people in the
manufacturing industry join their company
pension scheme, compared to just over a third
in the retail sector. It is therefore crucial that
employers within the manufacturing sector
are aware of the auto-enrolment (AE)
requirements introduced by
Government legislation.
Issues to Consider
Calculating the staging date
There are a number of important
stages to be completed in order to
successfully identify and implement
the AE requirements for your business.
Each employer will have a ‘staging
date’ when the automatic enrolment
requirements will first apply to it.
Broadly, the staging date is determined
by size of PAYE payroll, with the largest
employers (120,000+) commencing
on 1 October 2012 and medium sized
employers (250+) on various dates up
to 1 February 2014. Employers can
look up the staging dates applicable
for different-sized PAYE schemes on the
Pensions Regulator’s (Regulator) website
by submitting their PAYE reference
online.
Problems can arise if there is a
discrepancy between the staging date
that the regulator assigns and the date
that the employer believes applies to it.
In order to avoid this, employers should
ensure that they provide the correct
information to the regulator. Errors in
calculating the correct staging date can
lead to complaints from workers. Enrol
workers too late and the employer may
need to make backdated contributions,
but too early and the employer could
face claims for unlawful deduction from
employees’ wages.
Assessing the workforce
One of the trickiest aspects of the AE
process can be assessing to which
workers the employer duties will apply.
This must be carried out at the staging
date and also a number of later dates.
It is important to note that AE is not
limited to employees, but extends to
the wider group of “workers”. Although
for some employees the categorisation
as a worker may be obvious, there are a
number of difficult cases and employers
should ensure that they are familiar
with guidance from the regulator and
the requirements of the AE legislation.
In particular, employers in the
manufacturing industry need to watch
out for workers who work in various
locations or are expatriates.
Once the employer knows who qualifies
as a worker for the purposes of AE, there
is a three-part assessment in order to
determine whether employer duties will
apply to that worker. This will consider:
-
the worker’s age;
- whether the worker works in the UK
under his contract; and
- the worker’s earnings to see whether
qualifying earnings are payable in
the relevant pay reference period.
Again, there are a number of tricky
areas for employers to look out for,
including persons who are exempted
workers for the purposes of AE and
workers who have fluctuating earnings.
Once its staging date has passed,
each employer will have to continue to
monitor the workforce and identify the
Automatic Enrolment Date (AED) for
each:
-
new worker who is an eligible
jobholder;
- existing worker with threshold
earnings who reaches age 22; or
- existing worker who meets the
threshold earnings limit for the first
time.
Further, the employer’s duty to re-enrol
eligible workers which mainly arises
around the time of the third anniversary
of the original staging date is already a
live issue for many larger employers and
will soon be on the horizon for many
more. Again, these difficulties can be
overcome by employers ensuring that
their records and payroll processes are
equipped to deal with re-enrolment and
also that they are planning for it well in
advance.
The AE process
Broadly speaking, an employer will have
one month from its staging date (and
from any later AED) to enrol eligible
workers into a qualifying pension
scheme. Specified information about
the process must be given to each
eligible worker within one week of
the AED. The Pensions Regulator has
published detailed guidance in relation
to the communications which should be
sent to workers regarding AE and this
guidance is a useful reference point in
preparing any communications.
Employer duties beyond the
staging date
Employer duties continue beyond the
staging date, requiring the continual
monitoring of workers who are not
already eligible job-holders to determine
if and when they qualify as a different
category of worker for AE purposes.
For employers in manufacturing,
these on-going duties are unlikely
to prove more problematic than the
initial staging process, provided that
the necessary monitoring and recordkeeping
systems are in place.
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