- a change to the automatic enrolment (AE) duties trigger set out in legislation for these new employers (known as post-staging employers)
- extending to these employers the option to defer automatic enrolment for their workers (currently this is available only to employers in the staging profile)
The consultation is being made in advance of the outcome of the 2017 Review of AE, which will look at whether AE continues to meet the needs of individuals saving for their retirement in the future. These measures need to be in place before the existing provisions in the Employers’ Duties (Implementation) Regulations 2010 start to apply to new employers in April 2017.
The response to the consultation will be published in March 2017 with the regulations due to come force on 1 April 2017. The regulations will amend the existing Occupational and Personal Pension Schemes (Automatic Enrolment) Regulations 2010 and the Employers’ Duties (Implementation) Regulations 2010.
Changing the AE duties trigger date for employers
Since October 2012, employers have been brought into workplace pensions gradually with each employer knowing in advance when their AE duties will start. This is set out in the AE Employers’ Duties (Implementation) Regulations 2010. The AE staging profile ceases to apply to some newly created employers from April 2017, as more than four years after the reforms were introduced, the expectation is that complying with AE duties is now part of the normal process of setting up a business in the same way that new employers are expected to deal with tax and national insurance from the outset. Therefore during this year new employers will become subject to near immediate AE duties on the day on which PAYE income is first payable in respect of any worker – known as the AE duties trigger date.
In addition, the current AE duties trigger date, for new employers, differs from that which will be commonly understood by those from whom an employer might seek assistance when complying with their AE duties, e.g. payroll software providers, accountants and pension providers. These groups will only have experience of dealing with employers who are within the AE staging profile, and whose duties dates were set as the beginning of a calendar month determined by their PAYE reference. In these circumstances, it will be difficult to explain clearly, to both employers and their advisers, when the AE duties will apply to a new employer who will be outside the staging profile and who will therefore be subject to near immediate AE duties. Even where the AE duties trigger date can be accurately identified, most new employers would need to carry out a complex manual calculation of their workers’ first pension deduction, as most commercially available payroll software does not currently support the post-staging employer AE duties trigger.
Furthermore, the current AE duties trigger date works against the intention of the AE reforms which aim to bring workers into pensions saving at the earliest opportunity after they take up employment. The date of first PAYE income trigger means that an individual may not be automatically enrolled into pensions saving scheme until up to a month after starting work with their employer. Non-legislative approaches to resolving this issue would not provide the definitive AE duties start date that TPR needs in order to have confidence in whether, and when, to take enforcement action against an employer who fails to comply with the law.
The TPR concluded that changing the legislative definition for the AE duties trigger date is the correct approach and will enable them to operate the compliance regime correctly for AE; enable employers to easily know when their duties commence; and make calculations of contributions easier for employers and payroll providers.
The draft regulations change the date of the AE duties trigger, for post-staging employers, to the day on which the first worker begins to be employed by the employer.
Deferring automatic enrolment for new workers
Existing employers brought into the AE duties via the staging profile have the ability to pause automatic enrolment of new workers by up to three months (this is known as ‘postponement’ for employers within the AE staging profile). TPR proposes to extend this administrative easement to new employers
A further legislative power is also necessary to extend the easement to new employers, including small and micro businesses. These employers are likely to benefit most from the ability to have more to time to deal with the official administrative requirements around automatically enrolling a new worker. It is the employer’s choice as to whether they use the easement, and for how long they choose to defer enrolment within the three month window.
The consultation will close on 3 March 2017.