People who are treated as workers
The following people are treated as workers but are not covered by the employer duties:
People who are not treated as workers
The following people are not treated as workers so the employer duties don't apply to them:
Since 6 April 2016 employers have discretionary powers to not enrol directors or those with protection from the lifetime allowance charge.
A: Each employer will be required to fulfil their employer duties separately, ignoring any other employment or earnings that the worker has.
A: Directors of a company are not treated as workers for the employer duties, unless:
So if Josh doesn't have a contract of employment to work for the company, he won't be treated as a worker, even if he takes on other workers who will be covered by the employer duties. If he does have a contract to work for the company, he still won't be treated as a worker unless he takes on another worker. In this case, both Josh and the other person would be treated as workers.
A. Employers have a duty to assess their workforce to identify the types of worker they employ and the duties they'll have to carry out. For a maximum of three months employers have the option to defer:
This allows employers to smooth the administration of their employer duties and align it with their existing business processes. For example, they can use deferment to:
They can use deferment with their whole workforce, groups of workers or individuals.
A: Partners are normally self-employed, so they're not treated as workers for the employer duties. However, any employees of the LLP (e.g. administration staff) are likely to be covered by the requirements.
Employers do have to consider that salaried partners in the LLP may be classed as ‘workers’. Such employers will need to consider this aspect and seek advice if required.
A. As far as the auto enrolment rules are concerned, you must use the post exchanged salary to calculate whether or not minimum contributions have been met.
This is best covered by an example:
Pre exchange salary is £50,000. Contributions are 3% employer and 5% employee (including tax relief). The employee wants to use salary exchange to make their £2,500 contribution. Their post exchange salary is therefore £47,500, meaning that the actual employer contribution of £4,000 (£1,500 + £2,500) represents 8.42% of the £47,500 salary, not 8%.
It therefore needs a bit of maths to calculate in advance what level of sacrifice would result in the minimum contribution being met when measured against the post exchange salary. Most providers require the minimum to be based on the pre exchange salary, accepting that this results in the contribution then being more than the minimum required when measured against the post exchange salary.
In the above example, the employer is making the minimum contribution and the employee is using salary exchange to make the employee contribution. It's unlikely that providers and/or the Pensions Regulator will allow the total required contribution to be funded by employee salary exchange. The employee must always have the option to go for a conventional employer/employee contribution basis and there must be no coercion into using salary exchange.
The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. Also it may not reflect the options available under a specific product which may not be as wide as legislations and regulations allow.
All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor.