Directors, limited liability partners and auto enrolment

Published  20 February 2024
   5 min read

6 April 2016 brought in changes to employer duties for directors and partners in limited liability partnerships. Here we explain exactly what’s changed.

Key facts

  • Directors are only workers if they have a contract of employment.
  • Sole directors are exempt from auto enrolment.
  • From 6 April 2016 an employer can decide whether to apply employer duties to directors.

One director companies

The Pensions Act 2008 says that directors are not treated as workers unless they’re employed under a contract of employment to work for the company AND there is at least one other person employed by the company under a contract of employment. 

In other words, a company with just one director and no other employees is exempt from auto enrolment. What this means in practice is that they don’t have to complete a declaration of compliance or set up a pension scheme.

Multi-director companies

Where there is more than one director in a company, each director should be looked at separately to determine worker status.

Stylised image of decion tree for assessing multi director companies. This image is an infographic and has alternative text available if you are using a screen reader.

Flow chart

Is the director employed by the company under a contract of employment?

If no: Not treated as a worker

If yes: Is everyone else employed under a contract of employment?

If yes: treated as worker

If no: not treated as a worker

But regardless of the status of the directors, if the company takes on an employee in the future, chances are that the new employee will be a worker, and if any of the directors are employed under a contract of employment, they will be workers too.

What about office-holders?

Office-holders include non-executive directors, company secretaries, board members of statutory bodies and trustees. They normally won’t have a contract to work for the company concerned so normally won’t be treated as workers.

However they might also have a contract for services for part of their duties, so could be treated as a worker in respect of that contract. 

A word about contracts

A contract of employment can be written, verbal or even implied.

In the case of very small companies, for example where a married couple are both directors, it could be that there won’t be written contracts in place - but that doesn’t mean that they will not be treated as workers.

They will need to test themselves against the criteria like any other director.

What if a director is a worker?

Where a director is treated as a worker, all the employer duties apply.

In practical terms however, directors might only be receiving nominal PAYE income – for example at or just over the National Insurance threshold – with the bulk of earnings paid as dividends.

So although the director might have to be assessed for auto enrolment, they might not have to be automatically enrolled. There will still be duties that must be performed, like having a scheme available and giving workers information, but where there are only one or two directors, this shouldn’t be too onerous.

Since 6 April 2016

Since 6 April 2016, the employer duty was turned into a discretionary power. In other words the employer can decide to treat a director as if the employer duties applied but can equally decide not to apply them. If the employer duties are applied, all duties apply, not just the enrolment duties – for example, the information requirements and the director’s right to opt out. But of course, it may be that on assessing the director, the employer finds that they are not an eligible jobholder and so don’t have to auto enrol them (but the director would still have the right to opt in).

If the employer decides not to apply the employer duties, the director again has the right to opt in.

Limited Liability Partnerships (LLPs)

The same discretionary power also applies to ‘genuine’ partners in LLPs. Genuine partners now don’t have to be subject to the employer duties but can be if the partnership decides that’s what it wants to do.

The partnership needs to apply HMRC’s Salaried Member Rules which are intended to define those members who are more like employees than partners in a traditional partnership.

A member of a LLP will normally be regarded as a salaried member (and therefore an employee who has to be automatically enrolled) if the following apply:

  • the nature of the payments to them from the LLP is in fact disguised salary
  • the member does not have ‘significant influence’ over the affairs of the partnership
  • any capital contribution made by the member to the partnership is less than 25% of the disguised salary

However even if the member of the LLP is deemed a genuine partner, the partnership could still treat them as a worker.

This will help those partnerships who would find it easier to enrol all eligible jobholders, including those who are in fact genuine partners.


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