Pensions auto enrolment is hot news for smaller employers and their employees at the moment.
With larger businesses already having made their journey through automatic enrolment and the telling of varying stories of good news and bad once through it, there are plenty of employers who still have this project on their busy horizon.
Employment agencies are one of the business sectors facing a real dilemma regarding pensions automatic enrolment
With staging dates for for those employers who haven’t already been affected scheduled for anytime between now and February 2018, agencies are facing the additional cost of funding for qualifying ‘employees’. For many agencies this is the straw could almost break the camel’s back because it comes so soon after the financial impact of the extended benefits afforded to agency workers recently.
In effect, virtually any temp or contractor who is engaged in work for an agency (subject to age and earnings thresholds laid out in the automatic enrolment legislation) will be classified as a ‘jobholder’ and will need to be enrolled in a qualifying pension scheme. The only exceptions are those who are paid in a payroll cycle that is less than a week, one-person companies and people who aren’t working (or ordinarily working) in the UK. So, in effect, this will encapsulate pretty much everyone who goes through the agency’s PAYE system. This will cause an administrative overhead for employment agencies that they could well do without. But ignore it they can’t!
In very simple terms, auto enrolment legislation calls for the person who either employs or is responsible for paying the worker to set up the pension scheme required by the change. In the case of employment agencies, because they are responsible for the payroll of their temps, the burden falls with them. As a result, they will be required to set up the pension scheme and engage in their role as collector and administrator of the contributions and memberships.
But what about the cost of this?
The type of scheme required in such circumstances is likely to be either an occupational scheme that’s run by trustees or a group personal pension scheme which is run by the pension provider. The downside for agency owners is that where they are acting as ‘employer’, they must also make minimum pension contributions. While the contributions start at a relatively low 1% of salary, they are set to rise to 3% by the fourth quarter of 2018, making such costs potentially significant. But in actual fact it’s not only the cost of contributions that makes auto enrolment onerous, but it’s also the administration of so many workers and which definition of ‘salary’ should be used.
Where agencies have a huge number of workers who may work intermittently with them and with other agencies as well as having different elements to their total pay, the whole administration of auto enrolment for agency owners is likely to be a headache. Add to this the management of opt-outs and the decisions regarding whether or not to factor these additional costs into the pricing they pass on to their clients and it’s easy to see why agency owners are feeling the pressure right now.
If you run an employment agency and would like a helping hand to get auto enrolment running as smoothly as possible, why not get in touch? We have teams of experts on hand to make sure your journey into workplace pensions is as stress-free as possible.