06 April 2016

Helpbox are a firm of accountants, tax advisors and business consultants. We provide services which are specifically designed to help owners of small businesses to manage and run their businesses profitably.

One area which a lot of our clients have asked for help is  in relation to the Pension regulations. Known as Auto enrolment.

Helpbox provides FREE GUIDANCE to all our clients on this subject.

Recently one of those clients raised a very interesting question. The question and the reply we believe is something many other owners of small businesses would benefit from reading.

The back ground is that the client [unnamed] is grappling with running a successful business and on top of the normal 18 hour day they have to find time to implement the new pension regulations. Their staging date is quickly approaching and we have been providing free guidance by telephone, email and letter. As a result of one our communications the client raises an very interesting question.

Email from our client to Helpbox:

Hello Mark,

I was under the impression from the government websites etc. and when I spoke to you on the phone recently, that employees had to earn over £10,000 per year but your recent letter states employees earning  between £5824 and £10,000 so which is it? I have letters ready to send to the staff but need to know which staff to give it to.

Kind Regards,

[a Helpbox client]

Helpbox Reply

Dear [customer]

I understand why you ask that question. It isn’t easy to understand the differences. The way the pension regulations label the employee categories only adds to the confusion. But below I explain that there is a difference between those who earn over £10,000 and those that earn more than £5824 but less than £10,000.

The difference

Those that earn more than £10,000 are ‘eligible’ to join an [auto enrolment] pension scheme.

Those that earn more than £5824 but less than £10,000 are workers who are ‘non eligible’ to join a pension scheme. This is where the confusion comes. Because they are eligible to join a your pension scheme if you set it up. But only ‘eligible’ workers can decide if you [the employer] has to have a workplace pension scheme. If one ‘eligible’ worker chooses to ‘opt in’. Then all other workers [employees] can ask to join.

So let’s look more closely at those different category of workers.

Eligible workers

If a worker [employee] earns over £10,000 p.a. they are classified as an ‘Eligble’ worker. They have to be consulted. They decide to opt in or opt out. If they want an employer pension scheme they opt in and the employer has to provide a workplace pension scheme.

Non -Eligible workers

If any ‘eligible’ worker [employee] wants a pension [they opt in]. You have to provide a workplace pension. Then all non-eligible employees, earning over £5824 can ask to join the employer pension scheme.

However, if the ‘eligible’ workers decide to opt out, then the employer can decide not to have a workplace pension scheme and the ‘non-eligible’ employees can’t change that decision. Also if no eligible workers opt in the employer can still provide a workplace pension scheme for any worker who wants it.

Entitled workers

There is a third category – ‘entitled’ workers. Those that earn less than £5824. They are called ‘entitled’ workers they can ask to join your workplace pension scheme.

Answering your email directly you must give the letters to the ‘eligible’ workers. Those who earn £10,000 + p.a.

You should also inform the other ‘eligible’ employees. Those that earn more than £5,824 but less than £10,000 of their rights under the pension regulations. The same goes for ‘entitled’ workers, any sub-contractors or agency staff which you engage.

A note of caution

Also remember, the reason why the pension regulations don’t refer to ‘employees’. But instead refer to ‘workers’ and ‘job holders’ is because, any self-employed and agency staff are classed as your ‘workers’ and are subject to the same pension auto enrolment process.

Below I have also included a useful table to explain this further. I hope this helps.

We are here to help owners of small business, like yourself, so if you have any other questions please don’t hesitate in contacting me.

Pension auto enrolment free guidance information sheet.

For automatic enrolment, employees fall into three categories depending on age and salary. Employees who already belong to a qualifying workplace pension scheme are not eligible for automatic enrolment.

Here’s a table to show which category you could fall into:

Table: 1

16 – 21 22 – State pension age State pension age – 74
Less than or equal to £5,824 Entitled worker
Over £5,824 and up to £10,000 Non-eligible jobholder
£10,000+ Non-eligible jobholder Eligible jobholder Non-eligible jobholder

Eligible jobholder

Eligible jobholders will be automatically enrolled into their workplace pension scheme.

If an employee opts out of the scheme, you must review the pension auto enrolment process every 3 years and they can again decide to join a workplace pension scheme. If the employees decision is to join a scheme then those that opt out can be re-enrolled again every three years if they are still eligible.

Non-eligible jobholder

Non-eligible jobholders will not be automatically enrolled into their workplace pension scheme but can ask to join.

If you opt to join the scheme, you will benefit from contributions to your pension from your employer. You will both need to make minimum contributions.

Entitled workers

Entitled workers will not be automatically enrolled into their workplace pension scheme but can apply to join a company pension scheme.

NB: Employers must contribute to eligible and non-eligible employees pension. But they don’t have to contribute to entitled workers’ pensions.

Helpbox hope that this information is useful and provides a better understanding of a complex area of law, and which many owners of small businesses find bewildering. Most small businesses can’t afford to pay out hundreds of pounds, in some case thousands of pounds, on consultants fees. That’s where we step in. We examine our clients problems and then research and explain a solution.