In the United Kingdom, new laws that have come into force from October 2012 last year require employers to enrol their employees automatically into a pension scheme. Additionally, it is also mandatory that the employers pay minimum pension contributions to the employee’s pension fund. The minimum contribution to be made by the employers starts initially at 1% and subsequently increases to 2% and 3% in the following years.
All employers are not obligated by law to implement the new rules starting October. The implementation date, referred to as the “staging date”, is decided on the basis of the size of the payroll of the company. Presently, large employers are expected to ensure compliance with the new rules. However, most of the employers are likely to be affected soon as staging dates pop up every month for many of them.
Recruitment Agencies – How Does the New Law Impact Them
On reaching the staging date, companies will have to automatically enrol all their employees who have completed 22 years of age and are working in the United Kingdom into a pension scheme as well as ensure that mandatory deductions from their salaries are made as stipulated. Further, the law is applicable not only to their staff, but also the temporary agency workers that they employ.
Umbrella Companies – How Does the New Law Affect Them
The new rules are also applicable to those umbrella companies that employ contractors or temporary workers. The expectation is that most of the umbrella companies will fund their part of the pension contributions from the rate that has been agreed with the agency. This will lead to a reduction in the individual’s take home pay. If an umbrella company fails to effectively communicate the changes that have taken place, you can expect to receive queries from your candidates when they come to know that there will be a drop in their take home pay.
It is of utmost importance, therefore, that companies get in touch with their umbrella suppliers at once to determine as to how they are planning to fund employer pension contributions on reaching their staging dates. For example, the staging date for Brookson is September 1, 2013, but some of the umbrella companies having larger pay rolls may have to implement the new rules much earlier.
Opting Out of Pension Contributions
It is true that employees can opt themselves out from making contributions to the pension fund, and it is expected that contractors in large numbers working through umbrella companies or those who are on temporary assignments will definitely exercise this right. It must, however, be noted that employers cannot persuade their employees to opt out of the pension scheme. Employers who persuade their employees to opt out will have to pay financial penalties. It is, therefore, absolutely important that organizations are fully aware as to how umbrella companies are planning to implement the auto enrollment of employees into the pension scheme and how they are going to communicate the same to their employees.