Dear SMEs, pensions auto-enrolment might apply to you sooner than you think…especially if you engage consultants!
Pensions auto-enrolment has been in the news for some time but, until now, it was only for the big guys. As of the 1st of April, employers with between 50 and 250 ‘eligible jobholders’ will be required to auto-enrol those jobholders (unless the jobholder has opted out) in a pension scheme and make mandatory contributions to it.
The mandatory contributions will be introduced gradually, but by October 2018 employers will need to contribute 3% of the jobholder’s earnings and the jobholder will need to match that (which with tax relief will comprise an 8% pension contribution per annum).
Perhaps you don’t have quite that many employees (and, if not, your auto-enrolment date may not be for a little while yet*) but have you stopped and considered what constitutes an eligible jobholder? Does this include your freelancers and consultants?
Unfortunately for employers, there is no clear black and white answer. Typical, eh?
Some criteria is clear – the jobholders must be at least 22, meet the earnings threshold (which usually increases in each tax year, but is currently £10k) and must not already be an active member of the employer’s qualifying pension scheme.
However, this is where it gets a bit muddy… Consultants (including individuals contracted through a personal service company) are either ‘workers’ under the Pensions Act 2008 (and therefore potentially covered by the auto-enrolment regime) or they are self-employed contractors (and therefore potentially excluded).
So, is your consultant a ‘worker’?
No single factor alone will be conclusive when deciding whether an individual is a worker. However, the Pensions Regulator has given a helping hand and has suggested that consultants are likely to be workers if all, or at least most, of the following statements are true:
If your combined workforce of employees and consultants is nearing the 50 mark, you might want to consider assessing the status of your consultants using the criteria above.
If you haven’t done so already, you may also wish to consider affirming your consultancy arrangements and ensuring your consultants are not deemed ‘workers’ or ‘employees’, by putting in place clear consultancy agreements.
If you’d like to discuss your consultancy or auto-enrolment arrangements further, we’d be happy to have a free, no obligation chat with you – just give us a bell on 0207 234 0200.
*Subject to some exceptions for ‘new’ employers, for those of you with 30 to 49 eligible jobholders the current commencement date for your auto enrolment obligations is 1 August 2015 and, if you have less than 30 eligible jobholders, you’ve got until 1 January 2016.
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