Auto Enrolment and
Sole Company Directors
Auto Enrolment (“AE”) is a mandatory process to enrol all eligible employees into a pension scheme however, according to industry statistics, there are over 1.7 million companies in the UK consisting of a sole director and no employees. Many of these companies may prefer to make pension arrangements separately to AE and there is some uncertainty over how Auto Enrolment applies to them.
The Pensions Regulator
The government body responsible for work based pension schemes is The Pensions Regulator, who have issued guidance on how to apply Auto Enrolment. The Regulator has confirmed that as AE applies to ‘workers’ and that a director without a contract of employment is not a worker, therefore companies consisting solely of directors without employment contracts do not need to auto enrol.
If the Pensions Regulator has written to the company with a date to commence AE (known as a staging date) but the directors believe that AE duties don’t apply to the company, then the Regulator will accept a pre-populated email to inform them. The email requires a code from the letter to the company and certain other details.
If the Regulator is not informed that AE doesn’t apply to the company, then it may issue a statutory notice to comply before issuing penalties.
Pitfalls
There are a number of pitfalls to be wary of:
- AE is an on-going process to be reviewed each pay date so if a contract is issued to a director in the future, then the company may need to auto enrol.
- Many companies will have a single employee, perhaps the director’s spouse. This employee may constitute a ‘worker’ and the company may need to auto enrol.
- If the company provides false or misleading information to the Regulator then the company may face enforcement action. The Regulator can apply a variety of penalties for non-compliance, including a civil penalty of up to £50,000.
This is a brief overview of just one aspect of Auto Enrolment which is a highly complex subject. Muras Baker Jones is able to guide you in the whole process from understanding your responsibilities through to implementation, and in on going administration going forward. If you would like more information on how we can help you please call our Tax Director, Jenny Marks or your normal contact at the firm.
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