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Auto enrolment

How to approach a couple of tricky issues

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I run a small accountancy practice, with the vast majority of my clients being sole director consultancy businesses with no additional employees, thus making them exempt from auto enrolment. Some of my clients do not pay themselves a salary at all and therefore no PAYE scheme is in place. I have two issues:

1) Client A - engaged an employee in the business in February 2019. The employee is under 22 and earns under £833 per month. He left employment in July 2019. The only other person on the payroll is the sole director of the company, who earns £719 per month.

2) Client B - engaged an employee in the business in September 2018. The employee is also under 22 and earns under £833 per month. The director does not pay himself a salary, so the PAYE scheme was set up specifically for the new employee.

I had assumed that because the employees did not meet the criteria to be put into a pension scheme, no further action would be necessary. However, I am now doubting myself, and on review of the pension regulator website, I believe that my clients did need to carry out auto enrolment duties - certainly each of them writing to the employee in question to tell him he would not be put into a scheme, but that he could join a scheme if he wished. Client A would, presumably, have had to send himself a similar letter (although over the age of 22 he earns £719 per month so still not required to be auto-enrolled). It appears a Declaration of Compliance may also have been required.

Obviously I intend to query with the clients whether they have had any correspondence with the Pensions Regulator since taking on the new employees, but I fully expect them to say no.

My question is - how would you approach these issues? In the case of Client A, the employee has now left, and so presumably the client is now exempt again from auto-enrolment. I am not sure what the implications of this are with regard to sending the required correspondence to the employee who is no longer employed / carrying out a declaration of compliance for an employer who is now exempt from auto-enrolment duties.

In the case of Client B, if it turns out that no action has been taken, presumably my client can now write to his employee and complete the declaration of compliance - but what are the penalties for doing this late likely to be? 

In both cases, I do not expect the employees (both students) to have actually taken up the offer of them making their own contributions to a pension scheme.

Although the responsibility for compliance with auto enrolment lies with my client, and I am not contracted to carry out auto enrolment duties on their behalf, I do feel that I should have made them aware of these issues at an earlier date. What would others do in this situation? Should I offer to pay any penalties as I did not spot what needed doing in time? As a sole practitioner, it's helpful to have others to bounce ideas off when things go wrong and I very much appreciate any replies to my query, the worry of which is keeping me awake at night!


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By Matrix
07th Aug 2019 10:19

You are mainly correct. No obligation to set up a scheme but in both cases the employee should have been offered to join a scheme and, if they had accepted, a scheme should have been set up (this assumes they earned more than £512 a month, if less then no action would have been required).

You only have to complete a declaration of compliance if the employer has been set up with a letter reference, client A was probably set up as a Director only payroll if no correspondence was received from The Pension Regulator.

For the new Client B scheme then you would need to look up the letter reference and complete the declaration of compliance by the due date.

I suggest you familiarise yourself on how to find out the letter reference (although the client should send you the correspondence from TPR as I agree they are responsible with the compliance), how to complete the declarations and all the due dates and how to email TPR for Director only payrolls (no scheme required but if TPR are expecting a declaration then one is required or you need to let them know it is Director only).

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Replying to Matrix:
By sparkler
07th Aug 2019 13:20

Thank you Matrix for that very helpful reply. A couple of things:

Client A - I have checked further using the TPR online tool, and there is a letter reference for this PAYE scheme. TPR were advised by e-mail that the scheme was not an employer for the purposes of auto-enrolment back in February 2018 (due to being director only). Does there not become an obligation to file a declaration of compliance once an employee is taken on? Or should the relevant letter simply have been sent to the employee, with a declaration of compliance due on a future anniversary of the staging date?

Client B - I think I may be worrying about nothing over this one. I have located the letter code and entered this in the Declaration section of the TPR website. It says I cannot start a re-declaration at this point, indicating that the original declaration of compliance has already been carried out. I will check this with the client.

Many thanks again - would appreciate your further thoughts on the situation in A!

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