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Auto-enrolment: myth or fact?

Simon Parsons
Simon Parsons

Auto-enrolment legislation is complex; and complexity brings uncertainty. In this article Simon Parsons looks at some of the common myths that have arisen relating to auto-enrolment and details the actual facts.

Myth: Postponement delays the enrolment of employees.

Fact: Postponement delays the assessment of employees.

Postponement is an additional flexibility for the employer to choose to postpone the assessment for auto-enrolment for a period of up to three months. Find out more about auto-enrolment postponement – what it is and when it can be applied.

Myth: The pay period for auto-enrolment is the same as for tax.

Fact: From its introduction, the pay period for auto-enrolment is determined as a pay reference period, which is presently different than the pay period for tax – especially for employees with variable payment (i.e. the hourly paid).

However, DWP have consulted on changes which may see an alignment of the pay reference period with the tax period, but this is not anticipated to be allowed before 1 November 2013 (subject to further confirmation). So hopefully the discrepancies will soon disappear.

Myth: Contractual enrolment fulfils the requirements of auto-enrolment.

Fact: Contractual enrolment only fulfils the requirements of auto-enrolment if an individual is an 'eligible' worker; there are implications, such as opt-out, for any 'non-eligible' or 'entitled' workers who have been contractually enrolled.

Contractual enrolment is not the same as automatic enrolment. Contractual enrolment requires the worker’s consent to join the pension scheme which is often obtained via the terms of the worker’s employment contract, whereas automatic enrolment does not require the worker’s consent to join the pension scheme.

See this guide from The Pensions Regulator for more information on Contractual vs Automatic Enrolment.

Myth: Triennial re-enrolment requirements apply to anyone opting out.

Fact: Triennial re-enrolment applies only to 'eligible' workers. Others must be enrolled whenever the threshold is next breached.

Myth: 'Qualifying earnings' is the same as 'NIC earnings'.

Fact: Qualifying earnings may not be the same as NIC earnings as the legal definition is actually different.

We have outlined the definition of qualifying earnings along with our feature article which covers the worker assessment, calculation approach and certification in relation to qualifying earnings, while HMRC's definition of NIC earnings can be found here.

Introduction to Employer Responsibilities

Further questions on your responsibilities?

In last month's Connection poll, 83% of you said auto-enrolment was the key payroll challenge you face in the second half of 2013. To help you, we've created a short video to provide you with a simple, yet in-depth description of your employer responsibilities.

Get in touch to find out how we can further support your organisation with auto-enrolment.

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