What is Postponement?
Postponement (also known as a “waiting period”) is a legitimate method by which employers can delay having to assess and automatically enrol employees.
The assessment of employees can be delayed for a maximum of three months, within which time you can select a date to assess an employee; known as a deferral date. Postponement is the only time that this new legislation allows the employer some control, via a transitional delay, over the enrolment date and process.
When can Postponement be used?
Employers can use postponement from:
- The employer’s staging date
- The date when an employee’s circumstances change so that they meet the criteria for auto enrolment
- An employee’s first day of employment
It is no surprise that in these tough economic times employers of large businesses, already affected by auto enrolment, have used postponement to the full extent. In doing this employers are able to put back the contribution cost of auto-enrolment for up to three extra months.
That may be one attraction of seeking to use postponement, but there may be other reasons why postponement might be used other than to delay the inevitable.
Postponement might be used tactically in order to avoid triggering automatic enrolment for an employee. For example, you may have an employee who is on a basic salary which is below the £10,000 per year threshold but receives annual bonus that takes them over this threshold. In this scenario, the employee would be auto-enrolled at the end of the year when they get their annual bonus and as a result may only receive a small pension contribution once every year. This outcome is neither beneficial for you or your employee, so it would make sense to bring in deferral by using postponement to avoid this situation. By postponing pensions auto enrolment over the period when this employee temporarily earns above the threshold you would avoid triggering auto-enrolling them onto a pension scheme.
Seasonal employees provide another example of when deferment could be used tactically to avoid auto-enrolling them. If you employ seasonal workers then you may wish to use postponement to give additional flexibility by delaying assessing staff for up to three months if some will then fall out of the pensions automatic enrolment regulations.
Remember: If you postpone from your staging date, your staging date does not change and your obligations start at that point.
What Postponement does not do
Postponement does not change your Staging Date. An employer must still get everything in pace for their Staging Date and if postponement is being used they must write to tell the staff who will be postponed within six weeks of the Staging Date.
Staff whose automatic enrolment you’ve postponed can choose to opt in to your pension scheme during the postponement period.
Although postponement is a complex tool, it has the benefit of being able to be used time and time again, so that employees in the aforementioned scenarios could avoid auto-enrolling for years to come.
Postponement is undoubtedly a tool that should be considered when planning for the changes that will brought about by auto-enrolment.