We thought it would be useful to blog a few series of FAQs relating to Auto Enrolment from the CIPD
How do you assess workers for auto-enrolment where pay is backdated?
When assessing a worker’s eligibility for auto-enrolment, the employer must consider what earnings are actually payable (that is, due and expected to be paid) in the pay reference period. If an amount is due in a period but not paid until later, then a rectification procedure is required (effectively re-assessing the members whose earnings initially fell short of the threshold). However, if it is intended from the outset that back-payments will be made (and this is in line with employment contracts) then rectification is not required. It is therefore necessary to consider the precise nature and circumstances of any backdated pay, to determine how it counts for assessment purposes. (CIPD)
Can an employer delegate someone to act on its behalf to comply with the auto-enrolment rules?
The legislation imposes various duties on the employer as regards: member communications; record-keeping; contribution refunds. TPR has no problem with someone (e.g. the scheme provider) carrying out these duties on the employer’s behalf – but the employer remains legally responsible for ensuring that the activities are carried out correctly and on time.
–> Clarity People Solutions works closely with an Independent Financial Adviser to set up, advise and administer schemes for our clients.
How does Tier 2 certification work in a DC scheme with different contribution categories?
As an alternative to paying the minimum 8% of qualifying earnings, employers can self-certify minimum contributions on three further, alternative bases: Tiers 1-3. Tier 2 certification of DC contributions requires that the aggregate pensionable pay of the jobholders must equal at least 85% of the aggregate total earnings of those jobholders in the previous year. If you are using Tier 2 certification for groups of jobholders with different contribution scales, you must apply that aggregation test separately for each group. (CIPD)
Do workers have to opt out if they want to pay DC contributions below the statutory minimum?
If you auto-enrol a worker into a qualifying DC scheme, it is not necessary for them to go through the opt-out procedure if they want to pay contributions at a rate below the statutory qualifying minimum (assuming the scheme actually allows them to pay at such a lower rate). Remember, however, that such members would have to be re-enrolled back on statutory minimum contributions after 3 years (following which they could again elect to pay lower contributions – scheme permitting). Section 6 of the Regulator’s Opting out guidance gives further information on this topic.
TUPE transfers – if we take on employees under a TUPE transfer, what staging date applies?
It is the receiving employer’s staging date that determines when these employees should be auto-enrolled.
For temps paid through an agency, who has the auto-enrolment responsibility?
It is the person responsible for paying agency workers that has responsibility for auto-enrolment.
What is the auto-enrolment earnings trigger for those with regular contractual pay below the earnings threshold but who may have earnings spikes (e.g. overtime) that take them over in isolated pay reference periods?
The trigger is the same as for other workers – i.e. when earnings in any pay reference period exceed the trigger level. It is, of course, possible to apply postponement of up to three months, and then re-assess earnings at the postponement date. If earnings have fallen back below the threshold at that date, there is no enrolment obligation.
How does the three-yearly re-enrolment cycle work?
Employers must re-enrol opters out on a three-yearly cycle. The employer can pick a re-enrolment date for all its eligible jobholders within three months either side of the three-year anniversary of its staging date. It does not have to automatically re-enrol jobholders who had opted out during the 12 months preceding its re-enrolment date.
Do we have to enrol people who have already drawn their company pension but remain in employment with us?
Yes, if they meet the eligible jobholder criteria. There is no exemption.
Do we have to auto-enrol workers who have already opted out of the pension scheme?
All eligible jobholders must be automatically enrolled, even if they have previously chosen to cease active membership of a scheme prior to their employer’s staging date. They can choose to opt out again if they wish.
For help with Auto Enrolment please contact Lisa on 07810870243 or firstname.lastname@example.org