Auto Enrolment and the Charity Sector

In October 2012 Automatic Enrolment was introduced in the UK. The pension system had begun to ‘burst at the seams’ with many people living way beyond their retirement age and therefore drawing on the government pension funds for a longer period of time. With less people contributing through national Insurance payments into the government pension funds, something had to be done. Auto enrolment was seen as a way to get workers and employers to contribute into a pension fund.

The largest businesses went first and there has been a steady introduction for the rest of the UK businesses until 2016, when the majority of smaller businesses , including charities, are now reaching their appointed staging dates and are about to embark on their duties.

When the staging date is reached businesses must group their workforce into the following categories:

Eligible jobholders
Workers who are aged between 22 and the state pension age (SPA), work in the UK and have earnings which exceed the earnings trigger for auto-enrolment which is currently (2016-17) £10,000 a year. When an eligible jobholder is automatically enrolled the employer must contribute into the pension.

 

Non-eligible Jobholders
Workers who are not eligible to be automatically enrolled, although they have a right to opt into the pension scheme. They are aged between 16 and 74, work in the UK and have earnings below the current £10,000 trigger for auto enrolment. They can also be workers who have earnings above the £10,000 trigger but are excluded from automatic enrolment because they are outside the age scope being aged between 16 to 21 and SPA to 74.  When a non-eligible jobholder opts into the scheme the employer must also contribute.

 

Entitled workers
Aged between 16 and 74, work in the UK and have earnings below the current Lower earnings threshold (2016-17 £5824) Entitled workers are able to Join a pension scheme but the employer does not have to contribute as well.

In some cases the charity sector have a more onerous task ahead because of the higher than average number of volunteers, casual and temporary staff working in this sector. When considering whether your workforce should be included for auto enrolment you will have to decide whether they are classed as a ‘worker’. To do this you will need to consider the contractual relationship you have with the individual.

The Pension Regulator (2016) Detailed Guidance for Employers, Booklet 1, page7. Available at https://www.thepensionsregulator.gov.uk/docs/detailed-guidance-1.pdf determines that a worker is someone who:

• works under a contract of employment (an employee), or
• has a contract to perform work or services personally and is not undertaking the work a part of their own business.

They further state that anyone who has entered into a contract of this type is required to comply with the new employer duties.

Volunteers would not normally have a contract of service and are therefore not deemed as workers. However, this may not be the case if any form of payment or non-financial benefit is afforded them.

The Charity Finance Group (CFG) have produced a number of useful guides to help charities with their automatic enrolment duties.

There is an employment Status Guide 2016 https://www.cfg.org.uk/resources/Publications/~/media/Files/Resources/CFDG%20Publications/EmploymentGuide-printfriendly.pdf

There is also an Auto-enrolment for small charities guide https://www.cfg.org.uk/resources/Publications/~/media/Files/Resources/CFDG%20Publications/smlcharitiesautoenrolment.pdf

If you would like to discuss your Auto Enrolment situation in more detail, please contact Carolyn Cunningham, Payroll Manager at Wright Vigar, or a member of the payroll team by emailing carolyn.cunningham@wrightvigar.co.uk or call 01522 531341 – we would be delighted to be able to help and advise you.