Are directors exempt from automatic enrolment?

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The Pensions Regulator (TPR) has made exemptions for directors in certain circumstances. Directors, even those who have an employment contract can still be exempt as they are not classified as a worker. So it very much depends on how a director is classified. Only employers who employ ‘workers’ will have auto enrolment duties.

A director is defined as anyone who is ‘holding office’ as a director. This does not include anyone who is a director in name only.

  • For companies: A director is formally appointed under the Companies Act 2006 and also covers anyone who is acting as a director. Acting directors will have a decision making role of the company.
  • For corporate bodies: A director is anyone who holds an office of director created by establishing legislation or Royal Charter.

 

Directors classified as workers

Directors can be classified as a worker for automatic enrolment if they:

  • Have a contract of employment
  • At least one other person (can be another director) also has a contract of employment

A contract can be either written, verbal or an implied contract. Where there is no written contract of employment in place or any other evidence of an intention to create an employer / worker relationship between the company and a director, The Pensions Regulator will not argue that an implied contract of employment exists.

A contract of employment does not have to be written down anywhere, it could also be either a verbal or implied contract. Where a person is a director of one company but works (i.e. an employee) for another company, then they are classified as a worker for that second company.

Directors without an employment contract

Where a director does not have a contract of employment, they cannot be classified as a worker and will always be exempt from automatic enrolment. Where a company has one or more directors who do not have contracts of employment and who do not have any other staff or worker then they do not have auto enrolment duties. In these cases, the company does not have to complete a declaration of compliance. However, these companies will need to communicate this to The Pensions Regulator.

Where a company does have other employees, they will be classified as an employer. Even if none of the staff qualify for automatic enrolment, the employer must still complete the declaration of compliance to inform the Regulator that they have complied. Where a employer  is exempt from automatic enrolment and then hire an employee, they will then have auto enrolment duties to perform.

Still confused? The whole area of directors and automatic enrolment is not a straightforward one. You will find more detailed information available on employment status section of the GOV.UK website.

 

Written by Karen Bennett | BrightPay Payroll Software

BrightPay is an innovative payroll software package with an impressive 99% customer satisfaction rating. Our bureau package is just £229 + VAT / tax year. Book a demo today to see how easy your payroll processing can be.

 

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