We were recently approached by the Finance Director of a small but prestigious group of hotels who was concerned that from 2012 all companies must automatically enrol their staff into a pension scheme. With over 1,000 staff and an average staff turnover of 36% per annum our client was particularly keen to understand how temporary staff should be administered, determine what the additional costs would be to his business and establish the Company's legal responsibilities.
Our client's business is heavily reliant on students and temporary staff who normally work for them during the summer season and who on average stay within their business for approximately 6 months. An average staff turnover of 36% is good for the hotel/catering trade and our client is proud of its ethical standards and the relationship it has built with its workforce. The hotel group presently offers its staff access to a Money Purchase pension scheme and operates a closed Final Salary pension scheme. At present 85% of the group's employees do not belong to either pension scheme.
The Legal Position
The principle of automatic enrolment was introduced by the Pensions Act 2008 which set out reforms designed to make saving for retirement the norm for employees. What this means for employers of all sizes is that from October 2012 and phased in over a number of years, they will be obliged by law to pay contributions into qualifying pension scheme for most, if not all, of their employees.
A key challenge for our client will be identifying who they (the relevant "jobholders") have to auto enrol as not only are a large number of their staff temporary, they also tend to be younger in age. The requirements for all employers are as follows:
Workers aged 22 and over, but under State Pensionable Age will have to be auto enrolled if they have qualifying earnings (£7,475 in 2011/12) ("Eligible Jobholders"), Workers between 16 and 21, and those between 65 and 75 who have qualifying earnings, may opt to become a member of an automatic enrolment scheme ("Non-Eligible Jobholders"), and Those aged over 16 but under age 75 who do not earn the minimum qualifying earnings can demand membership who can demand membership of a pension scheme. ("Entitled Workers"). In particular our client will need to decide whether when employing temporary staff their earnings will exceed approximately £623 per month in 2011/12 and the likelihood that they will remain...