The law on pensions is changing! Every employer now has a duty to consider enrolling their employees into a workplace pension auto enrolment scheme and in some cases contributing towards it. Unfortunately this issue can not be ignored and needs immediate action and planning.
The rules apply to all employers and not just business owners. If you've taken on help at home such as a gardener, nanny, carer or cleaner then you’re likely to need to understand and implement a pension scheme for your staff through automatic enrolment. The National Careers Service estimate there are 111,484 nannies working in the UK with many middle class families also employing domestic help.
Failure to enrol employees who fit within the criteria will result in penalties, so you need to read this post carefully to understand what’s required and avoid any potential fines.
The new workplace pensions are being phased in at the moment starting with the largest UK employers and the scheme is expected to be fully operational by October 2018. If your employee does qualify, they must be enrolled. Only then will they have the option to opt out of the pension scheme should they choose to do so.
If your nanny or gardener earns less than the threshold then you must sign them up to a government workplace pension. New laws mean your employees need be registered by their employer in the next two years. These plans nudge people into pensions which is a welcome form of financial planning for the working population. However, it also means potential additional hours of admin for employers.
The reasoning behind the need for enrolment is that the government will consider you an employer for tax purposes even if you pay someone less than the £10,000 threshold. You will need to declare yourself on the government’s pension website but you won’t need to actually pay into a scheme.
Not enrolling employees into the workplace pension, by paying your gardener in cash for example, will lead to an official warning and a penalty of £400. After that there is a £50 fine per day until your company is registered. All small employers need to comply by March 2017. Be warned, the process can take a long time so it’s recommended you get this done as soon as possible.
Reading this you may be tempted to pay your staff in cash or, pay just below £10,000 and then the rest in cash. You may think this would avoid paying into a pension. Actually that is illegal and with crackdowns on tax evasion being a high priority for HMRC, this will be an obvious place for them to start with their enquiries.
To start a new pension scheme for your nanny or any other employees, go to Pensions Regulator website and enter your PAYE reference number to find out your staging date, the date you need to comply by. You should receive a letter from the Pensions Regulator 18 months prior to your start date. If you employed someone after April 1, 2012, then you’ll be classed as a new employer. That means you're likely to be at the back of the queue and will have to pay a pension only from 2017.
You can’t delay your staging date but if you want you can have it brought forward. For more information about workplace pensions read these posts, what auto enrolment means for your business and employees and assessing your workers for auto enrolment - who qualifies.
The content of this post is up to date and relevant as at 03/02/2016.
Please be aware that information provided by this blog is subject to regular legal and regulatory change. We recommend that you do not take any information held within our website or guides (eBooks) as a definitive guide to the law on the relevant matter being discussed. We suggest your course of action should be to seek legal or professional advice where necessary rather than relying on the content supplied by the author(s) of this blog.
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