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Auto-Enrolment: A Potential Issue to Avoid

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8 July 2014
There is a potential planning pitfall in relation to Auto-Enrolment that we wanted to share so that no one gets caught out!
 
If an employer has at least one “worker”, regardless of whether that “worker” is eligible, the employer will have to register with the Pensions Regulator and apply the relevant Auto- Enrolment safeguards etc.
 
For Auto-Enrolment purposes an office holder, such as a director or company secretary, is not a “worker”. This means that companies with only a director (without an employment contract) do not need to do anything about Auto-Enrolment.
 
There are many companies where the director’s spouse is also an employee. Where this spouse is an office holder, as above, the company will still be in the clear when it comes to Auto- Enrolment. If, instead, the spouse is an employee this will force the company into Auto-Enrolment procedures.
 
Now it would appear that a nice quick fix would be to make the spouse an office holder. However, this would not work as where a person is an employee they are deemed to have an employment contract under employment law, regardless of any actual contract in place. When that person is then made an office holder, they would take that deemed employment contract with them. This would mean that they would remain a “worker” and therefore Auto-Enrolment will still apply to the company.
 
To avoid this, the spouse employee would need to resign as an employee and then be made an office holder after their resignation. It is our opinion that ensuring this is done in advance of the company’s staging date should remove the company from the obligation of administering a pension scheme.
 

Gary Cook - Associate Partner
Gary Cook
Associate Partner Contact details