Automatic enrolment – Know the workforce: assessing workers

Recent research from The Pensions Regulator indicates that at least 78% of small businesses will be relying on their business advisers for help and advice. And with the first small and micro employers needing to be ready to provide a pension for their workers by the summer of 2015, you can expect to be approached by your clients soon asking for help to meet their statutory automatic enrolment duties. 

This article aims to shed light on what bookkeepers need to know about assessing their client’s staff for eligibility. 

Know the workforce: assessing workers

Under pensions legislation, employers will need to assess their staff to determine if they are eligible for automatic enrolment. It is essential to do this in order to comply with automatic enrolment duties. This is an area employers may request assistance from their bookkeepers – especially if the bookkeeper is already providing a payroll bureau service.

Initial checks

It is important that bookkeepers do not make assumptions about their clients’ workforce for purposes of auto enrolment. Assessing staff can take some time depending on the size of the business and complexity of the workforce. One of the first tasks, once the staging date is established  (preferably using  The Pension Regulator’s staging date tool on the website) is to do a ‘quick check’ to ascertain how long a full assessment is likely to take and ensure all the information held  about staff is accurate. The Pensions Regulator recommends starting to assess workers several months
before the staging date to avoid the risk of non compliance.

Staging date tool: www.tpr.gov.uk/staging-date

Who is a worker ?

What bookkeepers will need to do for automatic enrolment will depend on whether the employee is someone the legislation classifies as a ‘worker’.

At first glance, bookkeepers may assume that only employees who are paid through the PAYE system are considered workers.  However, the definition of worker under the legislation is widely drawn and it’s important not to accidentally exclude workers from the auto enrolment process as this contravenes automatic enrolment duties.

When determining who is a worker, employers and bookkeepers should be aware that:

  • A contractual employment relationship does not have to be in writing. To fall within the scope of ‘worker’ the contract can be verbal and the terms implied rather than explicitly stated.
  • Temporary and part time staff will fall into the category of a worker. In addition, depending on the contractual terms, workers may be those on zero hour’s contracts and secondees.
  • Another category of worker is a ‘personal services worker’. Typically, these may appear to be self employed however in certain circumstances they are actually classified as a worker. If an employer expects that person specifically to perform the work, if they cannot sub contract or send a substitute (unless it’s due to sickness) or if they are not undertaking the work as part of their own business then the employer may need to classify them as worker .
  • In making the judgement as to whether an individual is undertaking the work as part of their own business, the employer should consider factors including whether the employer controls the hours worked, whether tools or facilities are provided, whether employee benefits are provided and whether the employer is financially responsible for faulty work.

Who is a worker – detailed guidance: www.tpr.gov.uk/docs/detailed-guidance-1.pdf

Show your working

When carrying out the assessment, bookkeepers and their employer clients should exercise ‘reasonable judgment’ in defining workers. The rationale for the decision should be documented demonstrating the underlying reasons for inclusion or exclusion from the worker category. Should there be reason to suspect non compliance through failing to classify staff correctly, written evidence of how these decisions were reached may be required by the regulator.

Types of worker

The types of worker for which the employer will have automatic enrolment duties are:

  • Eligible jobholders: These are workers who are eligible for automatic enrolment and they are over 22, who ordinarily work in the UK and who earn above the earnings threshold currently set by the Department for Work and Pensions at £10,000 per annum.
  • Non eligible jobholders: These are workers who are not eligible for automatic enrolment but who can choose to opt in.  They are aged between 16 and 21, or between state pension age and 74, are ordinarily working in the UK and who earn above the earnings threshold of £5,772 per annum. Essentially they are workers who either meet the £10,000 per year threshold but not the age requirements or who meet the age requirements but not the £10,000 earnings threshold.
  • Entitled workers: These workers are entitled to join a pension scheme and are between 16 and 74, who ordinarily work in the UK but who earn below the earnings threshold of £5,772 per annum.

It should be noted that although the thresholds are quoted in annual terms, the assessment will always use a pro-rata value based on whether the worker is paid weekly, monthly or fortnightly etc.  This means that their total earnings in a year are not relevant and they only have to earn over the threshold in one pay period to trigger automatic enrolment.

It should also be noted that the categorisation of worker covers workers wholly or ordinarily working in the UK. For certain employments, this may require further investigation to understand the exact scope of these terms in relation to the employment.

Assessing the workforce – detailed guidance: www.tpr.gov.uk/docs/detailed-guidance-3.pdf

Ongoing duties

It is important to keep track of the workforce to ensure compliance with their automatic enrolment duties. Workers must be assessed regularly as their contracts, hours, pay and conditions may change. Regular data cleansing and ensuring all staff records are up to date will help ensure workers are assessed correctly and will avoid the risk of non compliance.

Further detailed guidance on assessing workers is available on the TPR website:  www.tpr.gov.uk/employers/know-your-workforce

Useful links:

Help your clients prepare for automatic enrolment: www.tpr.gov.uk/help-clients-prepare
The essential guide to automatic enrolment: www.tpr.gov.uk/ae-essential-guide
Staging date tool: www.tpr.gov.uk/staging-date
Planning tool: www.tpr.gov.uk/planner
6 month checklist: www.tpr.gov.uk/six-month
Assessing the workforce: www.tpr.gov.uk/employers/know-your-workforce
Postponement: www.tpr.gov.uk/postponement
Subscribe to our news by email: www.tpr.gov.uk/subscribe
Latest research on automatic enrolment: www.tpr.gov.uk/research

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