What Employers need to Know...
The different types of worker
There are three different categories of worker, determined by their age and how much they earn.
Eligible jobholders – must be automatically enrolled into an auto enrolment scheme.
Non-eligible jobholders – have the right to opt in to an auto enrolment scheme
Entitled workers – have the right to join a pension scheme
The table below shows you how to identify each type of worker.
*These figures are for the 2016/17 tax year
Are there any Employees exempt from auto-enrolment?
The following employees are exempt from auto-enrolment:
- members of an employer’s final salary pension scheme that meets certain standards
- members of an employer’s money purchase pension scheme where the employer contributes more than the statutory minimum
- members of an employer’s group personal or stakeholder pension scheme with the statutory minimum level of employer contributions.
Do the Employer duties apply to Employers that already have a pension scheme?
Yes. Even employers who have an existing pension scheme that is better than the minimum standard will have employer duties to perform - for example, telling existing members about how auto enrolment will affect them, and automatically enrolling new workers.
How do the Employer duties apply to hourly paid / zero-hour contract / temporary / seasonal /agency workers on short term contracts who are re-employed?
The employer duties apply to these workers each time work is undertaken. For example, if a company employs a worker for three months, then employs them again six months later, the employer duties will apply on both occasions.
How much do employers have to contribute?
Employers may choose from four alternative definitions of pensionable pay, with the default option being ‘qualifying band earnings’. Minimum contribution levels are being phased in, with employers having to contribute at least 3% of employee's earnings falling within the prescribed band by 2018:
- October 2012 to March 2018: at least 2% of an employee’s qualifying earnings, of which at least 1% must be paid by the employer.
- April 2018 to April 2019: at least 5% of qualifying earnings, of which at least 2% must be paid by the employer.
- April 2019 onwards: at least 8% of qualifying earnings, of which at least 3% must be paid by the employer.
Can employees opt out?
Employees may choose to opt out for up to one month after they have been automatically enrolled.
Workers who have been enrolled under contractual enrolment (eg. under their contract of employment) and entitled workers who have asked to join a scheme, do not have the right to opt out. If they want to leave the scheme, they must cease membership in accordance with the scheme rules. There are specific timescales during which employees can opt out of active pension schemes.
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