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Auto enrolment for atypical workers

March 2014

As an employer, compliance with the automatic enrolment duties can seem daunting. A comprehensive project plan is a must.

One of the first matters to address in this plan is an understanding of exactly 'who are your workers'.  

Why is it important to understand who are workers?

The auto enrolment duties will apply to any UK employer from the employer's staging date.  Different duties apply to different categories of worker so one of the very first steps to take is to understand what is meant by the term "worker".  Once an employer has ascertained who are its workers, it can then take the next step and see into which category the worker falls.  These categories are termed "eligible jobholder", "non eligible job holder" or "entitled worker".  The employer will have different duties for the different categories of worker.

So who is a worker?

The term "worker" does not automatically mean the same thing as an employee.  A worker is defined as any individual who:

  • works under a contract of employment (an employee); or
  • has a contract to perform work or services personally, i.e. they cannot send a substitute or sub-contract the work and is not undertaking the work as part of their own business.  This is generally referred to as a contract of service. 

It can immediately be seen that identifying workers may not always be straightforward.

Let us consider some areas of complexity:

Agency workers

If there is a contract between the agency worker and either the agent or the principal (the employer to whom the agency worker is supplied) then the auto enrolment duties will apply to this worker.  Either the agent or principal could be the agency worker's employer depending on who is responsible for paying the worker under any contractual arrangement.  If it cannot be determined who is actually responsible for paying the worker then whoever actually pays the worker will be deemed to be the employer. 

Secondees

Secondees will usually remain workers of the employer who seconded the employee.  However, it is important that the contracts of employment are checked to ensure that this approach  is correct in the particular circumstances.

Self employed contractor/personal service worker

An individual who is paid a fee as a self employed contractor under a contract for services is not normally a worker.  However, the contractual arrangement may sometimes be  blurred.  For an individual who does not work under a contract of employment but has a contract to perform work or services personally, there may be an argument that they are a worker with a contract of service (as opposed to a contract for services).  This is an area of complexity and we would recommend that legal advice is sought as often no single factor on its own can conclusively determine whether the contract is of service (worker) or for services (not a worker).

Office holders/non‑executive directors

Office holders (such as non‑executive directors) are generally not considered workers as there is no contract or service agreement.  However, again we would recommend that the contractual position is checked particularly for non‑executive directors who are involved in the day to day running of the business.

Temporary/casual workers

Generally, these will be regarded as workers.  It is worth noting that the three month postponement period can be useful in such circumstances to deal with turnover for staff who remain for less than three months.  However, it is important to remember that if a postponement period is applied:

  • there will be specific communications required to the workers; and
  • the employer needs to give the workers additional rights during the postponement period.  These rights depend on whether the workers are classed as eligible jobholders, non eligible jobholders or entitled workers.  Eligible and non eligible jobholders may opt into 'a qualifying pension scheme' during the postponement period.  Any workers who are classified as entitled workers must be given the right to join 'a pension scheme' (this scheme need not provide the same level of benefits as a qualifying pension scheme).

Zero hours/no obligation workers

Generally speaking, if you employ any such workers the employer will need to comply with the automatic enrolment requirements during any period for which they work for the organisation. 

It will be necessary also to consider whether the obligations continue to apply between assignments.  We would recommend that legal advice is sought in relation to this.

Consultants

Normally, self-employed consultants are not considered workers.  However, we would again recommend that the contractual position is checked.

Volunteers

Volunteers are not normally treated as workers as there is no contract for service.  Care needs to be taken though if payment is made to them (either financial or not).  The position should be checked.

 

It can be seen that identifying whether or not you have "workers" is far from straightforward.  If you have any concerns we would recommend that advice is sought at a very early stage in the process. 

Further information on these issues and auto enrolment generally can be found at the www.thepensionregulator.gov.uk 

If you require any specific legal assistance please do not hesitate to contact the Wrigleys pensions team leigh.holmes@wrigleys.co.uk tel: 0113 204 5732, josephine.manfredi-hamer@wrigleys.co.uk tel: 0113 204 5702 or rebecca.cooke@wrigleys.co.uk tel: 0113 204 5700.

 

The information in this article is necessarily of a general nature. Specific advice should be sought for specific situations. If you have any queries or need any legal advice please feel free to contact Wrigleys Solicitors

 

Leigh Holmes View Biography

Leigh Holmes

Partner
Leeds

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