There’s no doubt about it, implementing and complying with auto-enrolment will be a burden (at least initially) to every organisation.
Among the many requirements, as an employer, you will need to track different workers, auto-enrol those who become eligible in each pay reference period, deduct contributions and issue appropriate communications within the required timeframes.
So it’s hardly surprising that some employers (particularly those with schemes already in place) have asked the question
“Can’t I just auto enrol everyone?”
This is known as contractual enrolment and whilst it is possible, it does create a number of challenges.
Firstly, contractual enrolment requires the workers consent (whilst auto enrolment does not), which is typically included in a workers employment contract.
If you do not already have consent, as an employer you will need to ensure all employment contracts are amended to permit contractual enrolment for every employee. This in turn could create further complications as there may well be staff who choose not to accept the change.
One particular group who refuse a change in their contract is those on lower pay, who due to means testing, might ultimately see no additional benefit on retirement. An employer who contractually enrols everyone could therefore be inadvertently penalising its lower paid workers if they are required to make member contributions.
Another complication is that workers on a contractual enrolment scheme do not have the option to Opt Out. Once they are in, they’re in.
However, if they refuse to sign up for contractual enrolment in the first place, and they are eligible for auto-enrolment, you must provide them with an auto-enrolment scheme from which they can manually opt out themselves once enrolled. This messy circumstance is not likely to go down well with employees.
Running 2 schemes together, will undoubtedly make the burden on your business even greater. What’s more, many employers already using contractual enrolment are putting more workers into their pension scheme than are required by automatic enrolment costing them more money.
The message here then, is contractual enrolment may look the easy option, but do your homework and speak to a financial adviser.
We have reached our halfway point! If you feel that you need additional advice / information regarding auto enrolment, why not see if Credius could help? Visit our website www.credius/autoenrolment or contact us directly at email@example.com or call us today on 020 7562 5868 to arrange an appointment.
Next time: Auto Enrolment – How much is it going to cost?