UK: Pensions Auto-Enrolment – What Does This Mean For Your Hotel Business?

Last Updated: 10 October 2013
Article by James Caulfield

Wide-ranging pension reforms were introduced by the Pensions Act 2008 and came into force on 30 June 2012.  All UK employers will be required to auto-enrol eligible workers into a pension scheme and make mandatory contributions, in a process staged over several years. 

The process is not a simple one, as evidenced by the twelve guidance notes produced by the Pensions Regulator.  Furthermore, the guidance notes are aimed at pensions professionals rather than the employing business.  So what does the new system mean for you, as an employer?  The following is a broad outline of the requirements.

When will your hotel business be required to comply with these pension reforms?

The new duties will apply to your business from a "staging date" assigned by the DWP, and this will depend upon the size of your PAYE scheme on 1 April 2012. If you operate more than one PAYE scheme, your staging date will be determined by your largest PAYE scheme on that date.  For example, you are likely to have two PAYE schemes if you are an employment business supplying PAYE temps to clients, and your temp payroll scheme may be larger than the PAYE scheme of your own employees.

The staging timetable started on 1 October 2012 and currently runs until 1 February 2018 with larger employers becoming subject to the enrolment duties before small employers. The Pensions Regulator has published a staging date timeline to confirm the indicative staging dates that will apply for different sizes of employer, although the exact dates will depend on your PAYE data. See the staging date timeline. As a general guide, the position is as follows:

Number of workers in PAYE scheme

Staging Date range

More than 250

Between 1 October 2012 and 1 February 2014

Between 50 and 249

Between 1 April 2014 and 1 April 2015

Fewer than 50

Between 1 June 2015 and 1 April 2017

New employers set up between 1 April 2012 and 30 September 2017

Between 1 May 2017 and 1 February 2018

What does your staging date mean and what action do you have to take around that date?

Knowing your staging date is the first step and there are various things that you will need to do both before and after that date.  Broadly speaking, you must have:

  1. Fully assessed the composition of your workforce before the staging date;
  2. Enrolled "eligible jobholders" into an automatic enrolment scheme within one month of the staging date (unless a "postponement period" can be applied); and
  3. Register with the Pensions Regulator within 4 months of the staging date.

Assessing the composition of your workforce:  who must be auto-enrolled?

The auto-enrolment legislation applies to your "workers"; a wider category than "employee". A "worker" is an individual who is working or ordinarily works in Great Britain under a (a) contract or employment or (b) any other contract under which the individual undertakes to do work or perform services personally for another party to the contract, but that party is not a client or customer of the individual.  

You are obliged to make an assessment of your workers to determine which category each worker falls in.  This assessment must leave sufficient time for you to auto-enrol "eligible jobholders" within one month of your staging date.  You are then obliged to re-assess your workers continuously, in each relevant "pay reference period", which will coincide with your normal pay cycle, i.e. weekly or monthly, to determine if their category has changed and therefore their rights have changed.

The 3 categories of worker established by the auto-enrolment legislation are:

(a)  eligible jobholder:

A worker who is at least 22 but has not reached state pension age and has earnings that exceed the "earnings trigger in a relevant "pay reference period".  The trigger is set at £9,440 a year for the 2013/2014 tax year. 

(b)  non-eligible jobholder:

A worker who is aged between 16 and 21 or between state pension age and 74 and has qualifying earnings above the earnings trigger (£9,440 in 2013/2014) or a worker who is aged between 16 and 74 and has earnings exceeding the qualifying earnings threshold but below the earnings trigger (i.e. between £5,668 and £9,440 in 2013/2014).

(c)  entitled worker:

A worker who is aged between 16 and 74 and earns less than the qualifying earnings threshold (£5,668 in 2013/2014).

The categories are more easily represented as follows:

Awaiting table

 What are the rights of eligible jobholders?

Unless they are already active members of an existing "qualifying scheme" that you run at the date on which they become eligible for auto-enrolment, your eligible jobholders must be enrolled into an "automatic enrolment scheme". 

A qualifying scheme is an occupational pension scheme, or a personal pension scheme that is a registered pension scheme satisfying a statutory quality requirement under the Pensions Act 2008, the nature of which will depend on the scheme's benefit structure. 

The government has set up the National Employment Savings Trust ("NEST"), an automatic enrolment scheme that can be used by any employer.

You must make a mandatory minimum level of contributions (see below).

An eligible job holder can opt out of the scheme, but cannot be encouraged to do so, and cannot do so prospectively, i.e. they have to be enrolled before they can opt out.  This means that you will have to enrol them and make contributions which will have to be refunded if they subsequently opt-out.  Eligible job-holders who do opt-out must be automatically re-enrolled every 3 years from your staging date so will have the opportunity to consider whether they wish to continue to opt out, every 3 years.

What are the rights of non-eligible jobholders?

Non-eligible jobholders are entitled to opt in to your automatic enrolment scheme and must give appropriate notice of their wish to do so.  If they opt in you must give them the benefit of the mandatory employer pension contributions in the same way that as for an eligible jobholder.  You are obliged to inform non-eligible jobholders of their rights to opt in.

What are the rights of entitled workers?

Entitled workers are not entitled to auto-enrolment.  They are entitled to give you notice that they would like to join a registered pension scheme, not necessarily an auto-enrolment scheme.  If they do opt in to a registered pension scheme provided by you, they have no statutory right to opt out.  You are obliged to inform your entitled workers of this right to join a registered pension scheme.

What are the mandatory pension contributions?

If your auto-enrolment scheme or existing qualifying scheme is a defined contribution scheme (i.e. not a final salary scheme), you will need to make minimum contributions in respect of (i) eligible jobholders; and (ii) non-eligible job holders who opt in to the scheme. 

From 1 October 2018, the minimum contribution will be a total of 8% and your contribution will be a minimum of 3%.  This level of contributions will be phased in over time.  Currently the total contribution level required is 2%. 

Contributions are calculated according to the worker's earnings that fall within the qualifying earnings band, that is, earnings between £5,668 and £41,450 in the 2013/2014 tax year.  This means that they will not necessarily apply in respect of the whole of the workers earnings, only those earnings within the qualifying earnings band.  This may prove to be a difficult calculation to make, and there are options whereby the employer can choose to meet their obligations to make pension contributions based on the whole of the worker's pensionable earnings.  Although these may prove more costly, they will certainly be easier to administrate.

Earnings include the worker's gross salary, commission, bonuses and overtime pay. It also includes statutory maternity, paternity or adoption pay and statutory sick pay. 

What does this mean in practical terms?

1. Identify your staging date

  • Number of "workers" in your PAYE scheme on 1 April 2012

 2. Assess your workforce

  • Workers will fall into one of three categories
  • Identify the pay reference period
  • Identify the earnings payable to the worker
  • Compare the earnings with the qualifying earnings band and earnings trigger
  • Are they eligible in terms of age?
  • If so, they must be auto-enrolled within 1 month of their auto-enrolment date

 3. Select auto-enrolment arrangements for your workforce

  • Will you use an existing scheme if it qualifies?  Check with the scheme actuary.
  • Will an existing scheme require any rule changes (e.g. eligibility or waiting periods?)

 4. Postponement

  • Are you going to use a postponement period (up to 3 months)?

 5. Prepare standard form documents for use

  • Opt out and opt in notices
  • Standard auto-enrolment and joining information notices
  • Postponement period notices

 6. Review contracts of employment/Staff Handbook

  • Are you going to contractually enrol all employees regardless of whether eligible?
  • Update pensions provisions
  • Consider data protection consent in contracts

 7. Payroll

  • Set up auto-enrolment pay processes
  • Arrangements for paying contributions
  • Deduction of contributions from jobholders' earnings
  • Refunds need to be made to those who opt out

 8. High earners

  • Consider the position of your high earners:  if they have registered for enhanced or fixed protection from the lifetime allowance charge or have started taking flexible drawdown they must opt out within one month to retain protection.

 9. Implement enrolment and opting in/out processes

  • Enrol eligible jobholders in an automatic enrolment scheme
  • Provide information about auto-enrolment to jobholders and other categories of worker
  • Set up the opt out process
  • Allow non-eligible jobholders to opt in
  • Give entitled workers the right to join a registered pension scheme

 10. Check compliance issues

  • Communications with employees – template letters and information requirements
  • Data protection:  consent of employee to send information to pension scheme to enrol
  • Register online with Pensions Regulator within 4 months of staging date
  • Record-keeping – detailed records must be kept for 6 years
  • Timely payment of contributions

 11. Staff training for those in management/recruitment roles

  • Job applicants must not be asked whether they plan to opt out
  • Employers must not offer financial inducements to opt out

 12. Prepare for automatic re-enrolment every 3 years

  • Note those who have opted out will need to be re-enrolled unless they opted out within the previous 12 months
  • There is a 6 month window spanning the 3 year date for re-enrolment

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.