Why do I need to assess my workforce for Workplace Pensions?

3 years ago

Neilson Watts (Product Manager, Sage One Payroll)By Neilson Watts (Product Manager, Sage One Payroll).

If you’ve not heard anything about Automatic Enrolment of Workplace Pensions, where have you been hiding?  Have you had your fingers in your ears and your eyes shut? ;o)

You may think this is pension legislation and that it doesn’t impact your payroll but you’d be wrong! The success of ‘Auto Enrolment‘ is based on the quality and accuracy of the data stored in your payroll system and the functionality it includes to help you comply.

One of the key duties under Automatic Enrolment legislation as an employer is to carry out an assessment of your workforce in order to determine different categories your workers fall into. Each category has different duties you will need to undertake and communications to send them.

So what is a worker?

For these purposes, the definition of a ‘worker’ is somebody who undertakes work under a contract of employment (an employee) or has a contract to perform work or services personally and are not undertaking work as part of their own business (also known as a contract of service).

There are some exemptions such as:

* One Person Companies – where an individual is a director of the company and the company has no employees (i.e. the director has no contract of employment)
* Armed Forces – any serving member of navy, army or air force
* Office Holders – such as non-executive directors, company secretaries, trustees or board members of statutory bodies

(You can find more detailed guidance on assessing your workers status from The Pensions Regulator).

What are the 3 different worker categories?

When assessing your workforce, their worker category will be determined based on age, how much they earn and whether they are a UK worker.

1. Eligible jobholder

Eligible jobholders should be automatically enrolled into your qualifying workplace pension scheme, and the employer must contribute a minimum contribution to the pension scheme.  If the employee does not want to be in the pension scheme, they can opt-out…..but we’ll cover that off in a later blog.

Eligible jobholders are:

* Aged between 22 and state pension age (currently 65 for men and 60 for women)
* Earning above the earnings trigger for automatic enrolment which is currently £10,000 annually (£192 for weekly paid staff and £833 for monthly paid staff)
* Working in the UK

(Note: Earnings Thresholds for Automatic Enrolment can change each tax year).

2. Non-eligible jobholder

‘Non-eligible jobholders’ are not eligible for Automatic Enrolment so should not be automatically enrolled in your qualifying workplace pension scheme. However, they do have an option to ‘opt in’ to your pension scheme. If the worker chooses to ‘opt in’ employers must contribute a minimum contribution to the pension scheme.

Non-eligible jobholders are:

* Aged between 16 and 21 years of age and older than the state pension age
* Earnings above £10,000 (i.e. the earnings trigger for automatic enrolment)
* Working in the UK

or

* Aged between 16 and 74
* Earning between £5,772 (lower level of qualifying earnings) but below £10,000 (earnings trigger for automatic enrolment)
* Working in the UK

3. Entitled worker

Employers must ensure that Entitled workers have access to a pension scheme and the right to ‘join’ it.  The pension scheme does not have to be a qualifying workplace pension scheme and the employer is not required to make a contribution.
Entitled workers are:

* Aged between 16 and 74
* Working in the UK
* Earning below £5,722 (lower level of qualifying earnings)

Should I continually assess my workforce every time they are paid?

Simple answer is YES! Your employee’s earnings may fluctuate based on the amount of work they do for you, for example if you give them a pay rise or indeed sporadic payments such as overtime or bonuses.

If you employ zero hour contract workers whose working hours may fluctuate, you will also need to keep a close eye on whether they move from being a non-eligible employee to an eligible employee requiring you then to automatically enrol then into your qualifying workplace pension and start contributing to their pension scheme.

So how can I assess my workforce quickly?

The simple and affordable answer is Sage One Payroll! From just £5, £10 or £15 per month (for the 5, 10 or 15 employee version) not only will we help you prepare for Automatic Enrolment, we’ll effortlessly assess your workforce, automatically enrol eligible employees into a workplace pension scheme and seamlessly undertake ongoing assessment of your workforce.

Find out more on our Automatic Enrolment for Workplace Pensions page or by signing up for a free 30 day trial of Sage One Payroll now at http://uk.sageone.com/payroll/.