Auto Enrolment

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I have a payroll client who just has just one employee, who is in his early 60s, and earns around £600 a month, part time; on this basis he appears to be a 'non eligible jobholder' and so doesn't need to be auto enrolled but could choose to voluntarily opt-in.

In this situation, is the employer obliged to put a pension scheme in place from his staging date, or can he wait to see if the employee chooses to opt in and open a scheme then

If the latter, could he defer the opt-in decision as it happens which would give him up to 90 days to get set up with a suitable scheme?

Replies (33)

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By J_G_W
09th Feb 2015 09:59

If the employee opts in, they need to be joined in the next pay reference period. So, no the three months wouldn't apply here. 

He could simply create a scheme on-line with NEST for one employee, anything more than that would be a waste of time and money. Keep it simple. Set it up, park it, and use it if required.

Don't forget the compliance record keeping, Copy letters, copy opt in form, register with the pensions regulator etc.

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Euan's picture
By Euan MacLennan
09th Feb 2015 10:02

No, Yes & Yes

No - the employer doesn't need to have a scheme in place unless it has an eligible jobholder as an employee.

Yes - the employer could wait to see if the non-eligible jobholder wishes to opt in.

Yes - the employer could defer enrolment to 3 months after the staging date.

However, how would the employee know the terms of the scheme to decide whether he wishes to opt in if a scheme has not been set up in advance?  Whatever happens the employer will have to do quite a bit of compliance with the AE requirements, even without a scheme in place - writing to the employee, for instance.

It is just one of the conundrums about AE.  Do you need to set up an AE compliant pension scheme if no employees are going to become members?

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By J_G_W
09th Feb 2015 10:09

Yes - the employer could defer enrolment to 3 months after the staging date.

The question was, 'could he defer the opt-in decision as it happens which would give him up to 90 days to get set up with a suitable scheme?'

The answer is no. 

If the non-eligible employee opts in they must be enrolled into a qualifying scheme in the next pay reference period. So if weekly, next week, if monthly, next month. 

They can use postponement at staging of up to three months, however, once again if the employee opts in, they need to go in.

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Replying to lesley.barnes:
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By onicholson
09th Feb 2015 11:59

6 weeks

J_G_W wrote:

Yes - the employer could defer enrolment to 3 months after the staging date.

The question was, 'could he defer the opt-in decision as it happens which would give him up to 90 days to get set up with a suitable scheme?'

The answer is no. 

If the non-eligible employee opts in they must be enrolled into a qualifying scheme in the next pay reference period. So if weekly, next week, if monthly, next month. 

They can use postponement at staging of up to three months, however, once again if the employee opts in, they need to go in.

You have six weeks to process an enrolment, including via opt in notice, which begins from the date the opt in notice is received.

 

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By Smartie99
09th Feb 2015 10:32

so assuming we are at least 3 months past his staging date and the employee chooses to opt in, he could have as little as 1 week to allow this and so it seems he has little alternative other than to have a scheme in place? (or drop the employee before the staging date, which in all honestly is the most likely outcome of all this - so much for being the government of small business!)

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By ireallyshouldknowthisbut
09th Feb 2015 11:17

.

Surely the reality is you would set it up if asked to by the employee, and make up and shortfall for the time between when being asked to go in and it being active. 

There seems to be a perverse pleasure in doing things "by the book"

If you have one employee, chances are you work with them all day and are not going to be funny about these things.

 

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Replying to penelope pitstop:
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By Nickymouse
09th Feb 2015 11:56

As I have said on other threads, we need definitive answers to these questions.

It seems really silly and very time consuming to set up pension schemes for employers that obviously have no need and are not going to use them, why should we need to bother?, there is nothing about this on TPR website that I can see, they will no doubt say we have to set them up with no thought to the amount of needless expense and work it will take.

Can we have some common sense applied to this situation please before we spontaneously combust over the pressure of it all???

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Replying to lionofludesch:
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By onicholson
09th Feb 2015 12:41

Scheme only when needed

Nickymouse wrote:

As I have said on other threads, we need definitive answers to these questions.

It seems really silly and very time consuming to set up pension schemes for employers that obviously have no need and are not going to use them, why should we need to bother?, there is nothing about this on TPR website that I can see, they will no doubt say we have to set them up with no thought to the amount of needless expense and work it will take.

Can we have some common sense applied to this situation please before we spontaneously combust over the pressure of it all???

There is a definitive answer - you don't need a scheme until you're using it. That's already been mentioned here and on other threads. If you still aren't convinced, why not ask TPR directly? You can email or call to ask them general questions, including this one.

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Replying to lionofludesch:
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By Nickymouse
09th Feb 2015 13:27

Thanks

 

There is a definitive answer - you don't need a scheme until you're using it. That's already been mentioned here and on other threads. If you still aren't convinced, why not ask TPR directly? You can email or call to ask them general questions, including this one.

[/quote]

Thanks for this, I will be very happy if this is indeed true although from what I can see, there are no direct quotes from TPR or any other "pension body" unless I have completely missed it.

I will do as you suggest to get it from the horses mouth as it were but as so many people seem to be asking the same questions, why are the answers seemingly nowhere to be found?.

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Replying to lionofludesch:
Euan's picture
By Euan MacLennan
09th Feb 2015 13:50

Waste of time

onicholson wrote:

If you still aren't convinced, why not ask TPR directly? You can email or call to ask them general questions, including this one.

It sounds like a good idea, but when I e-mailed a comment that the letter headed "ACT NOW: you have new legal duties" being sent out a year ahead of the staging date was misleading as many of the recipients who are due to stage in 2016 and 2017 would be OMBs which did not need to set up a pension scheme, I received the following reply from a "Customer Support Adviser":

"Please be aware we have noted your comments and are passing on your feedback."

... which was about as useful as a chocolate teapot.

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By J_G_W
09th Feb 2015 12:32

Six weeks for letters etc yes. But if an employee opts in, they need to make a deduction, tell them the contribution level (QE, Tier 1, 2, 3). Tell them what fund they'll be invested in etc

Its hardly as simple as going, here's a letter Mr Employee. if you decide to opt in, I'll take an unknown figure from you, you'll need to pay something I suppose, we have no idea what the pension will be, who with or indeed what the fund or charges will be. You'll just need to trust us and we'll do it all in six weeks.

Hardly a good plan.

An employee should know they can opt in as they are legally entitled, they should know the contribution, scheme, funds and everything else in order to make that decision.

Saying you have six weeks to decide isn't really good enough.

Besides, how hard is it really. Go on NEST, set it up, tell them the scheme the contribution, fund and let them decide. Why wait.

 

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By Kazmc
09th Feb 2015 13:51

Director Payrolls

Sorry, moving away a bit from the original question.

I know that Director only payrolls are exempt, and TPR are writing to these companies advising them of this, but what about the following payroll scenarios;

Just 2 or more Directors

Just Director plus company secretary (usually spouse on Director salary £7956)

Will you be setting up AE for these payrolls?

I cannot find any clarification on this.

 

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By J_G_W
09th Feb 2015 14:11

All directors are exempt unless; the individual works for the company under a contract of employment and; there is at least on other person working for the company.

Only if both of the above apply then the Director would need to be automatically enrolled. Common in big companies, uncommon in small companies for a director to have a contract of employment mainly due to NMW etc.

A company secretary is a position of office so again, automatic enrolment would only apply in the above scenario i.e. contract of employment and employees

No, I won't be setting up a scheme for those scenarios. I will be informing The Pensions Regulator that the legislation doesn't apply and give my reason. This is to avoid any confussion and unwanted fines.

If they take on an employee, then I will set up a scheme and do as required. If they take on an employee after their staging date they need to contact The Pensions Regulator who will provide them with a new staging date.

 

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Replying to Paul D Utherone:
Euan's picture
By Euan MacLennan
09th Feb 2015 15:02

What are the requirements?

J_G_W wrote:

I will be informing The Pensions Regulator that the legislation doesn't apply and give my reason. This is to avoid any confussion and unwanted fines.

Please could you help with some more questions:

Is there a legal obligation to notify TPR that the legislation does not apply?

Is the TPR asking employers to inform them voluntarily if the legislation does not apply?

If not, what right does TPR have to impose fines?

How would an employer notify TPR that the legislation does not apply?

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By J_G_W
09th Feb 2015 15:16

1. Yes - Otherwise they will simply send out the fixed £400 fine for non-compliance after the five calender month deadline. If you tell them the legislation doesn't apply, they will update their records and expect no declaration. 

2. Yes - at the moment. TPR have advised me that the employer MUST tell them if the subsequently employ someone, at which point, they will provide a new staging date.

3. They have a right to impose fines as per the legislation which dictates that this is an employer duty. If the legislation doesn't apply them it is their duty to inform The Pensions Regulator. If the duties don't apply and they don't inform The Pensions Regulator they haven't complied. [Their response, not mine].

4. By letter or by email. I have discussed with the clients this applies to and provided them with a letter for them to sign. All the time highlighting that it is THEIR responsibility to make sure the information provided to TPR is correct and they if they subsequently employ someone it is their responsibility to confirm to them.

 

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By Oltonite
10th Feb 2015 10:25

I have asked TPR

I sent the following question to TPR

'Please can you just let me know if my understanding is correct.

If a scheme consists of only non-eligible job holders, e.g. a client and partner both earning £663.00 per month, they do not have to set up a pension scheme for auto enrolment. I believe they do however need to complete the Declaration of Compliance on your website.'

This is the reply I received

'Thank you for your recent email dated the 21 January 2015.

An employer will need a pension scheme in place when necessary this is where a worker meets the eligible job holder criteria or when an employer receives a valid opt in notice. Please click here for categories of worker.

Please note that if the employer does not have any eligible job holders on the staging date the employer may not need a pension scheme in place. However if any of the above occurs the employer will need to have a scheme in place and ensure active membership is achieved within the six week joining window. 

Furthermore, every employer must declare compliance with the Regulator. Employers have up to five calendar months from their staging date to declare their compliance via our online portal.'

 

I take this to mean that they do not need a pension scheme in place as there are no eligible job holders but have 6 weeks to set one up if a job holder becomes eligible or decides to opt-in.

Also ALL employers need to complete a Declaration of Compliance with TPR which I assume will inform TPR if a pension scheme is required or not and then they will know who to fine. We have not completed one ourselves so do not know what is contained in the Declaration.

 

Hope this info helps some of you.

 

 

 

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By Nickymouse
10th Feb 2015 10:20

Thank you Oltonite, this is great, just what I needed to know.

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By Richard_Carey
10th Feb 2015 10:23

declaration checklist

Here is the TPR 'Registration Checklist', which details the items that will be required when completing the online declaration:

 

http://www.thepensionsregulator.gov.uk/docs/automatic-enrolment-online-registration-checklist.pdf

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Euan's picture
By Euan MacLennan
10th Feb 2015 10:41

Inconsistency

Thank you, Richard, for the details of what will be required for the online declaration of compliance.  It would appear that details of the pension scheme (PSR number or name and address) are mandatory, so this clearly cannot be used if there is no AE pension scheme.

The e-mail from TPR to Oltonite says "Furthermore, every employer must declare compliance with the Regulator.  Employers have up to five calendar months from their staging date to declare their compliance via our online portal."

If he (and all the rest of us dealing with OMBs) do not have an AE pension scheme, how can he comply with this instruction from TPR?

Is it really down to all of us to draft our own letter or e-mail, as advised by J_G_W, to notify that the AE requirements do not apply?  Why has TPR not provided this obvious facility?

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By Nickymouse
10th Feb 2015 10:50

Good point Euan.

All we need it a tick box at the top of the form to say AE requirements do not apply and if necessary a small box underneath for explanations.

Seems simple enough to me but we are talking about a government body here!!!

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By J_G_W
10th Feb 2015 10:55

Its too difficult for the Government to possibly know who the legislation applies to. A company that merges gets a new staging date, who's a director, who isn't, who's the company secretary, who isn't, who's actually self employed, who isn't. The admin required would cost a fortune. So, they make the employer do it all for them, and to make sure they do, they'll find them if they don't.

The facts is, if you don't tell them it doesn't apply. How will they know it doesn't apply? How will they know you just decided not to do it like the ca 1,300 employers who recently got fined?

Send the letter/email. Keep a record. If they come fining, provide the copy details. It doesn't have to be a detailed letter. Simply, highlight the client, PAYE number, confirm that the legislation doesn't apply and why i.e. All directors, no contracts of employment etc. Ask them to update their records accordingly and get a director to sign the letter as being from the employer.

If they employ anyone, they need to inform TPR.

You can't register a scheme with TPR if you don't have one or any workers for that matter.

 

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Euan's picture
By Euan MacLennan
10th Feb 2015 13:28

@J_G_W

You are missing the point.

We don't expect TPR/Government to know who the legislation applies to.  We know that they make the employer do it all for them.  We know that they have the power to impose fines.

If they insist on issuing fines to every employer who has failed to notify compliance, they will be inundated with appeals from those who have not committed any offence.  It will take up a vast amount of TPR's staff's time to investigate the circumstances and cancel the penalties.  By the time they have done that, they will be cursing that TPR did not have the foresight to offer a simple online form for OMBs to confirm that the AE does not apply to them.  Even if we all submit individually-drafted letters or e-mails, the TPR's staff will have to read them all individually and will be cursing that TPR did not have the foresight to implement an automated system based on a simple online form to confirm that AE does not apply.  It is not in the interest of TPR to fail to provide such a facility.

TPR's staff will also be regretting that TPR has not made it clear in any guidance that AE does not apply to OMB director-only companies.  The standard letter currently being sent by TPR to employers staging in 2016 (many of whom will be OMBs to which AE does not apply) is, and is designed to be, a threatening letter and makes no mention of the exception for OMBs.

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By onicholson
10th Feb 2015 14:04

Future changes

TPR are meant to be working on a way to improve the reporting for companies without any workers.It wasn't a priority early on as none of the early staging companies were in that situation. Hopefully, a standard web form or variation of the current declaration will appear in the next year sometime.

If a company has workers but no scheme (due to not needing one yet), it still completes the declaration but doesn't have to include details of a scheme. The checklist doesn't make that distinction but the declaration itself asks the employer if they've enrolled anyone first.

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By J_G_W
10th Feb 2015 17:06

@ Euan MacLennan

I think you're missing the point Euan. They won't be inundated with appeals as they will have nothing to appeal against. They had obligations placed upon them by the legislation and they failed to act upon it. Whether that's enrolling all eligible employees or by informing The Pensions Regulator that they have no workers. They have committed an offence, non compliance.

 

 

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Euan's picture
By Euan MacLennan
10th Feb 2015 17:28

@J_G_W

Could you please point me to the sections of the legislation which say that it is an offence if an employer does not tell TPR that they have no workers and that TPR can impose a fine for such an offence?

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Replying to Ajtms:
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By J_G_W
11th Feb 2015 09:32

Sorry Euan, but I just don't have the time.

Euan MacLennan wrote:

Could you please point me to the sections of the legislation which say that it is an offence if an employer does not tell TPR that they have no workers and that TPR can impose a fine for such an offence?

I would rather point you in the director of TPR, I don't have the time.

The fact is, employers all have a staging date. If they don't register with the pension regulator within five months they'll get a letter with a warning. If they ignore the letter, they get a £400 fine. If they ignore the fine, they get a small claims court letter and a further fine if they have employees.

If an employer chooses to ignore all the above warnings and letters, they deserve the fines. And the argument from TPR will be, you got you letters, you got your warnings, you still ignored us; cheque or card?

Why leave it until they get in touch with your client. Why not just do the letter. Phone TPR and ask them.

But by all means, you can approach it in any way you wish. And I know that we have hundreds of payroll clients, many of which are just small director only schemes. I took the decision to communicate fully with TPR as they have confirmed I should do.

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Replying to WhichTyler:
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By onicholson
11th Feb 2015 10:39

No workers

A scheme with no workers has no obligation to complete the declaration of compliance. Penalties are issued for being in breach of the employer duties, which means they don't apply to these companies for failure to complete the declaration.

--

http://www.thepensionsregulator.gov.uk/docs/detailed-guidance-1.pdf

51. All employers with at least one worker, regardless of their age or earnings, must:
• declare their compliance (register) with The Pensions Regulator. This is an online process. You can find out more about it at: www.tpr.gov.uk/dec-compliance
• adhere to the safeguards. More information on the safeguards can be found in paragraphs 78-80.

Again in a reminder just above paragraph 78:

Important reminder
If the employer has any worker, they must complete a declaration of compliance with the regulator no later than five months after their staging date. More details on this process and a full list of the employer duties are available on our website.

--

However, TPR will by default assume all companies have workers and issue the usual warnings and penalties until you do something about it. The best answer is to be proactive and tell them the scheme has no workers but you could appeal the penalty later on the basis that it isn't applicable.

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Replying to WhichTyler:
Euan's picture
By Euan MacLennan
11th Feb 2015 11:19

Confirming no workers

J_G_W wrote:

Euan MacLennan wrote:

Could you please point me to the sections of the legislation which say that it is an offence if an employer does not tell TPR that they have no workers and that TPR can impose a fine for such an offence?

I would rather point you in the director of TPR, I don't have the time.

The fact is, employers all have a staging date. If they don't register with the pension regulator within five months they'll get a letter with a warning. If they ignore the letter, they get a £400 fine. If they ignore the fine, they get a small claims court letter and a further fine if they have employees.

If an employer chooses to ignore all the above warnings and letters, they deserve the fines. And the argument from TPR will be, you got you letters, you got your warnings, you still ignored us; cheque or card?

Why leave it until they get in touch with your client. Why not just do the letter. Phone TPR and ask them.

Thank you for explaining the procedure.

OMB clients are simply not going to "act now" in response to the threatening and misleading "ACT NOW: you have new legal duties" sent a whole year ahead of the staging date - they will put it off to nearer the deadline.  The warning letter is the first that OMB clients will receive after that and as it will threaten penalties, it would seem an ideal prompt to "act now" and write back to TPR (or consult their accountant) at that stage.  Unfortunately, on current form, the warning letter will still not mention that OMBs are not subject to AE.  However, let us hope that TPR will see sense before then and incorporate a facility on their website for OMBs to notify that AE does not apply to them (as mentioned by onicholson) and perhaps even amend their letter a year ahead of staging to mention that fact and ask OMBs to notify this using the hoped-for facility on the TPR website.

My request to be pointed to the legislation is not unreasonable.  Your answer does not address that - it basically says that TPR is a big bully and if you don't stand up for your rights, you will suffer.  HMRC guidance is notorious for not always stating the law correctly and it seems to me that with regard to AE, everyone refers to TPR guidance without any consideration as to whether it has the force of law.

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By Kazmc
11th Feb 2015 08:44

TPR Answer

Not sure if this will help anyone but below is a response to a query I posted on their linkedIn page re what Director/Co Sec scenario payrolls would be required to comply...

 

The Pensions Regulator

The Pensions Regulator at The Pensions Regulator

Company directors, as office holders, are not usually workers for automatic enrolment purposes and thus do not need to be assessed for automatic enrolment. However, care should be taken when assessing directors as it is necessary to check if they also hold a contract of employment with the company. This is because the legislation stipulates that if a director has a contract of employment and any other person in the company is also employed under a contract of employment, then the director will be a worker and will need to be assessed for automatic enrolment.

So, using your examples:

In a company with two directors only and no other staff:
If none of the directors are employed under a contract of employment, then they are not workers for automatic enrolment purposes.
If both directors have a contract of employment, then they are workers.
If one director has a contract of employment but the other director does not have a contract of employment, then none of the directors need are workers for automatic enrolment purposes.

In a company with three or more directors and no other staff:
If none of the directors have a contract of employment, then none of them is a worker.
If Director A has a contract of employment and either director B or C or any other director has a contract of employment, then director A is a worker (as well as the other director/s that have a contract of employment.

In the case of a company with one director and one company secretary:
If the director does not have a contract of employment then he is not a worker
If the director has a contract of employment and the secretary also has a contract of employment, then the director is a worker.
If the director has a contract of employment but the secretary does not have a contract of employment, then the director is not a worker for automatic enrolment purposes. In this example, the company will have automatic enrolment duties towards the secretary if she/he falls within the definition of “worker” for automatic enrolment purposes. 

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Replying to lionofludesch:
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By Nickymouse
12th Feb 2015 11:49

I'm sure it need not be as complicated as they make it

Kazmc wrote:

Not sure if this will help anyone but below is a response to a query I posted on their linkedIn page re what Director/Co Sec scenario payrolls would be required to comply...

 

The Pensions Regulator

The Pensions Regulator at The Pensions Regulator

Company directors, as office holders, are not usually workers for automatic enrolment purposes and thus do not need to be assessed for automatic enrolment. However, care should be taken when assessing directors as it is necessary to check if they also hold a contract of employment with the company. This is because the legislation stipulates that if a director has a contract of employment and any other person in the company is also employed under a contract of employment, then the director will be a worker and will need to be assessed for automatic enrolment.

So, using your examples:

In a company with two directors only and no other staff:
If none of the directors are employed under a contract of employment, then they are not workers for automatic enrolment purposes.
If both directors have a contract of employment, then they are workers.
If one director has a contract of employment but the other director does not have a contract of employment, then none of the directors need are workers for automatic enrolment purposes.

In a company with three or more directors and no other staff:
If none of the directors have a contract of employment, then none of them is a worker.
If Director A has a contract of employment and either director B or C or any other director has a contract of employment, then director A is a worker (as well as the other director/s that have a contract of employment.

In the case of a company with one director and one company secretary:
If the director does not have a contract of employment then he is not a worker
If the director has a contract of employment and the secretary also has a contract of employment, then the director is a worker.
If the director has a contract of employment but the secretary does not have a contract of employment, then the director is not a worker for automatic enrolment purposes. In this example, the company will have automatic enrolment duties towards the secretary if she/he falls within the definition of “worker” for automatic enrolment purposes. 

Do TPR ever read any of these things back to themselves?.

I'm getting a headache just reading never mind grasping what it's trying to say so what hope has the ordinary small employer?, they will just file their letters in the bin with everything else they don't understand.

I predict that this is going  be one holy mess but of course, it will all be our fault :-(

 

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By NYB
12th Feb 2015 12:53

No Eligible Employees but all have to be offered
Going round in circles. I have a client with a small music school. Youngsters teach. Earnings about £150pm. So no scheme needed? Correct? BUT they all have to be OFFERED to join. Is there a pro forma letter? My payroll package caters for all this type of letter ONCE a sheme is in place

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Replying to In a Daze:
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By NYB
12th Feb 2015 14:49

Pensions regulator

Thanks. Briefly looked & the first "fill in" was the name of the Pension Scheme. Lost the will to live at that point.

As picked up from earlier comments TPR have given noconsideration to OMB & Micto employers

Just like RTI two years back.

No doubt it will all come out in the wash!

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Teignmouth
By Paul Scholes
13th Feb 2015 17:16

Thanks to all

Just wanted to say thanks to all of the above contributors. 

As mentioned, there is naff all help on TPR's site about this (although it is helpful if you want to join the club) so this thread has been a great help.

See you all down the pub in 15 minutes.

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