As I’m sure you have seen in the media, new laws came into effect from October 2012 requiring all UK employers to automatically enroll their employees into a pension scheme and pay mandatory minimum pension contributions. The minimum level of employer contributions starts at 1% and then rises to 2% and then 3% in subsequent years.
Complying
Not all employers are obliged to comply with these new rules in October, the date they need to comply is determined by the size of their payroll – this date t is referred to as their “staging date”. As staging dates are triggering each month, it will not be long before most employers are affected.
How will this affect recruitment agencies?
Once your staging date is reached you have to automatically enroll your employees into a pension scheme (providing they work in the UK and are over 22 years old) and apply the mandatory deductions. This will apply not only to your staff but also to any temporary agency workers you employ.
Recent press suggested that the Pensions Regulator is targeting the recruitment sector in their next round of compliance reviews. So the temperature for compliance is certainly heating up.
How will this affect umbrella companies?
These rules also apply umbrella companies who employ contractors or temps that you have placed.
It is anticipated that most umbrella companies will fund the employer pension contributions from the rate agreed with the agency.
It is important that the Umbrella Company adequately communicates what changes have been made to ensure that contractors fully understand the legislation and how this may effect them.
It is therefore important for you to be engaging with your umbrella company suppliers now to establish when their staging date is and how they plan to fund the employer pension contributions. Brookson’s staging date was 1 September 2013 but umbrella companies with large payrolls were brought into the regulations as early as January 2013.
Opt outs
It is possible for employees to opt out of the pension contributions, but we don’t anticipate large numbers of contractors working via umbrella companies or on temporary assignments to exercise this right. Please note however, that the employer cannot induce its employees to opt out and there are financial penalties for those who do. It is therefore important to make sure that not only do you know how umbrella companies plan to implement auto enrolment but how they plan to communicate it to their employees.
For more information on auto enrolment please contact [email protected]
I am a chartered tax advisor with a specialism in the freelance contractor sector advising contractors on how to structure their affairs and recruitment businesses and end hirers on the effective…
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