UK: Pensions And Overseas Employees

Last Updated: 16 February 2016
Article by Mark Howard

When does the duty to auto-enrol overseas workers into a pension scheme apply?

All employers are required to automatically enrol certain workers "working or ordinarily working" in the United Kingdom in a suitable pension scheme.  The Administrative Court has recently had to grapple with the issue of whether seafarers, who work on vessels which spend all, or most of  their time outside of the UK, are "ordinarily working" in the UK and therefore qualify for automatic enrolment.  This decision will be important for all employers who have staff who frequently work outside of the UK or who are seconded abroad.

The UK Pensions Regulator ("the Regulator") is responsible for enforcing the obligations of employers to automatically enrol their eligible employees. The Regulator issued a "compliance notice" against Fleet Maritime Services (Bermuda) Limited, which employed the crew of P&O Cruises and Cunard cruise ships.  A compliance notice is an order for an employer to take steps to remedy a contravention of the automatic enrolment legislation and penalty notices can be issued for non-compliance.  The Regulator's position was that the workers would be "ordinarily working" in the UK (and subject to automatic enrolment) if:

  • the worker lived in the UK and  boarded the vessel in the UK, even if the cruise was mostly in foreign waters.
  • the worker lived in the UK, but began and ended each tour outside of the UK. The Regulator concluded that the travel and other arrangements at the beginning and end of each tour of duty supported the view that the work began and ended in the UK.

Fleet Marine Services challenged the Regulator's compliance notice by way of judicial review of the Regulator's interpretation of what was meant by "ordinarily works" in the UK.

Judgment

Mr Justice Leggatt considered how the phrase "ordinarily working" had been interpreted in legislation concerning the territorial scope of employment tribunals.  He considered that the appropriate test was to consider where the worker was based.  That should be determined by how the contract had been operated over time, rather than what was contemplated at the time when the contract was made.

Applying the test to seafarers, the judge rejected the idea that the ship itself was the worker's base.  When applied to a peripatetic worker, the concept of a base was the place from which the worker sets off at the start, and to which the worker returns at the end of the period when the worker is travelling in the course of their work.  A seafarer would be "ordinarily working" in the UK if a port (or other fixed base) in the UK was identified as the seafarer's base.  This would require a sufficient degree of regulatory in the seafarer's departure from and return to port(s) in the UK to constitute a normal pattern of work. 

The judge also rejected an argument from the Regulator that all peripatetic workers must have a base: rather all the Pensions Act required was consideration of whether the base was in the UK.

As a result, the judge upheld the Regulator's conclusion that a seafarer commencing and ending voyages from a UK port, was ordinarily working in the UK and subject to automatic enrolment.  However, this only appears to be the case  where there  is a habitual pattern over multiple voyages; the Regulator accepted that a seafarer engaged on a single tour of duty could not be regarded as having a UK base and therefore was not "ordinarily working" where the tour of duty begins and ends.

The Judge also rejected the Regulator's argument that the seafarers who travelled overseas before joining the ship were ordinarily working in the UK.  The judge ruled that although the time travelling was paid and not counted as leave, the seafarer was not working but commuting and so was not "ordinarily working" in the UK.

Comment

This was the first challenge to the Regulator's approach and the decision has largely upheld the approach adopted in its guidance; the Regulator has certainly been quick to proclaim it as a victory. Despite this the Claimant did succeed in having the Regulator's compliance notice quashed in part and may have many workers who are now outside the scope of automatic enrolment. Interestingly, the judge considered there was no clear victor and decided to make no order for costs. 

The decision provides welcome clarity on the treatment of peripatetic workers, but will leave employers having to consider carefully whether the totality of the employment relationship means that any peripatetic workers are based in the UK. It is clear that whether an employee is deemed to be ordinarily working in the UK will pivot on the facts of the case, with a key question being, where does the employee's tour of duty overseas begin and end?

The Queen on the application of Fleet Maritime Services (Bermuda) Limited v the Pensions Regulator

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.

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