Despite the widespread television
advertisements urging awareness of pension auto-enrolment (AE), a year or two
still remains until it becomes compulsory for small and medium-sized firms.
Nonetheless, such ads have focused talk on the importance of companies
providing their personnel with workplace pensions. The question for many of
those using London Registrars' business
consultancy service will be whether directors will be affected in addition
to regular employees.
The requirement of the rules is for
an employer to automatically enrol all of their "jobholders" in the
NEST state-provided pension scheme, or an equivalent scheme provided by the
employer and broadly offering the same benefits. However, some confusion may
prevail as to whether the rules regard directors as jobholders.
A employee or worker counts as a
jobholder if they normally work in the UK; are at least 22, but under state
pension age; and earn at or above the income tax personal allowance over the
applicable pay reference period - such as weekly or monthly. This allowance is
presently £9,440 per year, rising to £10,000 from April 2015. Even individuals
working for your company while meeting all of the aforementioned conditions do
not count as jobholders if they are self-employed.
Clients of London Registrars'
business consultancy service should be aware that with dividends not counting
as earnings, directors paying themselves a salary and taking their remaining
income as dividends aren't required to be auto-enrolled by their company.
However, such directors will still come within the scope of AE if they decide
in one year to pay themselves a bonus taking them above the income tax limit.
Even here, however, there are exemptions.
For AE purposes, directors only
count as jobholders if they are employed by their company under an employment
contract and are not the sole worker. A director is still exempt from AE if
they have a letter of engagement outlining the terms of their directorship, as
this is not classed as a contract. Those who do come under the scope of AE are
able to opt out, but are required to do so within 30 days. Those unsure whether
they are affected by AE and who do not wish to be included are advised to opt
out anyway to be certain.
The Pensions Regulator has recently
indicated that office-holders - essentially non-executive directors and company
secretaries - will also normally fall outside the scope of AE. Auto-enrolment
will apply to them, however, if they also have a "contract of
service" for all or part of their duties, given that this will make them
an employee.
In summary, directors should know
that they and their employees are equally affected by AE, but only where the
director also has a service (employment) contract. Non-executive directors with
a separate employment contract are also within AE's scope. Opting out of AE is
possible for those affected by it, but this has to be done no more than 30 days
after the time it first applies.
Editor’s
Note: London Registrars (http://www.london-registrars.co.uk) are represented by
the search engine advertising and digital marketing specialists Jumping Spider
Media. Email: info@jumpingspidermedia.co.uk or call: +44 (0)20 3070 1959
/ +34 952 783 637.
No comments:
Post a Comment