By Mike Morrison, Head of Pensions Development, AXA Wealth
A couple of months ago I wrote an article on auto-enrolment and made reference to my discussion about pensions with the plumber. Well, he was round again this week – quoting for a new bathroom – so I took the opportunity to follow up my research on his knowledge of auto-enrolment.
I asked whether following our chat he had heard anything and, to my surprise,he mentioned that the lady that does his payroll had mentioned it and that it was on the agenda. Still, his view was that he would probably not take any action until advised of the consequences of not doing so.
Two things struck me: first, what a sad life I lead, and second, although a statistical sample of one is not scientific, I do believe that many small business owners across the country will make the same decision as my plumber, not to act.
I did explain a bit more of the detail, namely that as a small employer it would be 2015 bythe time auto-enrolment would be complete and that it would be an offence to do nothing. This set me thinking about some of the issues that ‘micro employers’ are likely to face on the road to auto-enrolment, whether they opt for the qualifying workplace scheme or NEST:
• what about employers for whom English is not the first language?Inour great multicultural society there are many languages spoken -will such businesses be sufficiently aware of the need and procedures for auto-enrolment?
• there are undoubtedly a lot of businesses that successfully run on a ‘cash’ basis and will therefore try and remain outside the auto-enrolment net
• consider the administration for someone who might end up paying just a few pence a month
• will some jobholders who are currently ‘employed’ find themselves being reclassified as ‘self-employed’?Consequently, could we see an increase in the number of tribunals which have to consider an individual’s legal employment status?
• it is important to note that any employmentrelationship could mean auto-enrolment and all the detail that goes with this. So anyone who employs a nanny, an au pair, a gardener, etc. could well have to comply
• now for the really difficult one – employersmust not encourage workers to opt out of a pension scheme and must not imply in any way that a worker might receive more favourable treatment if he opts out. The employer cannot advise an opt out even if they believe it would be in their best interests to do so, and they must not treat a worker unfairly or dismiss him because he does not want to opt out, or this could go to an employment tribunal
• similarly, an employer cannot make a job offer or renewal of a contract conditional on whether the candidate agrees to opt out
• the effect of the Agency Workers Regulationsmust also be taken into account. Having come into effect in October 2011, the regulations aim to ensure that agency workers are provided with the same basic working and employment conditions as if they had been directly employed by the company for which they are carrying out the work. From 2012 The Pensions Act 2008 brings in the obligations for employers to automatically enrol all eligible jobholders, including agency workers, into a qualifying pension scheme and to pay initially 1% and eventually 3% contributions in respect of each eligible worker.
So what sanctions can be brought against employers who fallfoul of the rules? The Pensions Regulator can compel employers to comply with their auto-enrolment duties or impose a fixed penalty of £400 on employers who fail to comply.In some cases the Regulator can impose a daily penalty of between £50 and £10,000 depending on the number of employees affected.
Now let’s be honest – how many discussions that result in an opt out are likely? Particularly in the current economic climate, with unemployment rising?And how are they likely to be monitored?
Perhaps I am being overly pessimistic, but for me, auto-enrolment for small employers could be something of a disaster, as they are too busy doing what they do to spend too much time on pensions and the opt out could be too convenient.
Mike Morrison, head of pensions development, AXA Wealth
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