May 2015
21
Automatic Enrolment: Employer Duties and Director Exemptions
Who is subject to the legislation?
Automatic enrolment legislation affects all individuals who are classified as workers. The legislation will affect all workers between the ages of 16 and 74 who work or ordinary work in the UK. A worker can be either under a contract of employment (an employee) or be a personal services worker who has a contract to perform work or services personally and are not providing the work or services as part of their own business.
Who is a personal service worker?
A personal services worker cannot send a substitute or sub-contract the work unless they have a legitimate reason to do so (e.g. Illness). A personal service worker will have a “contract of service” to perform services personally as opposed to a sub-contractor having a “contract for service”. Various indictors will determine whether a contract is a “contract of service” or a “contract for service” and an employer must take all relevant considerations into account and make a reasonable judgement.
Should a director be considered a worker?
A director will be classified as a worker if he or she both works under a contract of employment and there is at least one other person working for the company under a contract of employment.
Employer Duties with respect to Directors.
A sole director could not be considered a worker even if he has a contract of employment.
If an additional director was to join the company under a “contract of service” contract then the company does not need to consider whether or not they are doing this work on behalf of their own business. A director who is not an employee is always exempt. The initial director is still not classed as a worker because there is no one else working for the company under a contract of employment.
If an additional personal service worker is hired under a contract of service who is not a director, then an employer duty will arise in respect of this worker.
If a worker now joins the company under a contract of employment (as an employee), then an employer duty will arise in respect of this employee and also in respect of the director who has a contract of employment. This is because there is now another person working for the company under a contract of employment.
If your company has received a letter from the pensions regular informing you of your staging date and you believe automatic enrolment duties do not apply to you because a director exemption applies then can contact them by emailing [email protected] . Visit this page to find a pre-populated email www.tpr.gov.uk/employers/what-if-i-dont-have-any-staff.aspx. This pre-populated email will prompt you to inform them of what type of director exemption applies, what the letter code for the company is, the PAYE reference and the companies house number.
