auto-enrolment and statutory leave
...TREAT EACH EMPLOYMENT SEPARATELY, PRACTICALLY SPEAKING, AS IF THEY HAD A NUMBER OF DIFFERENT WORKERS
Unpaid leave The Pensions Act 2008 still applies if an individual is on unpaid leave at the assessment date for automatic enrolment. If an individual is on unpaid leave at the assessment date and has been for the duration of the relevant pay reference period regardless of the reason – whether it is unpaid maternity leave, sick leave or even a career break – then there will be no qualifying earnings. For automatic enrolment purposes, the worker must still be assessed but will be categorised as an entitled worker. This process is ongoing, both during maternity leave and once the worker has returned to work, until there are qualifying earnings and the worker is automatically enrolled if age and level of earnings dictate. The employer must, of course, communicate with the worker in accordance with guidance published by The Pensions Regulator.
No contributions are payable by either employer or employee on behalf of workers who are already in a pension scheme and commence a period of unpaid leave, unless the rules of the pension scheme dictate otherwise. In the case of a woman being paid only statutory maternity pay, her pension contributions (both employer and employee) would cease once her statutory maternity pay period ended unless the pension scheme rules said otherwise.
Other issues l Salary sacrifice – In the same way that employer pension contributions must continue during maternity, paternity and adoption leave due to the SSA, this also applies if a salary sacrifice agreement is in place. However, the arrangement will be slightly different to that explained earlier, because when an employee gives up an amount of cash salary equivalent to the contributions they are making to the company’s approved pension scheme, the employer agrees to increase employer contributions to the pension scheme by an equivalent amount. This means that all contributions are employer contributions which continue during a period of paid leave at the same rate as if the worker
were working and receiving their normal pay. l Multiple contracts – It is common in some organisations, such as local authorities, for workers to have more than one contract of employment. If an employer has multiple contracts with the same worker they will need to consider how the contracts operate and whether they constitute a single employment. It is likely that employers in this position will have considered this issue for automatic enrolment purposes already but, as a timely reminder, factors to be considered when making this decision include the following: m Is holiday entitlement on the basis of aggregated contracts or is there separate entitlement for each contract? m Is maternity pay on the basis of aggregated contracts or is there separate entitlement for each contract? m Is sick pay on the basis of aggregated contracts or is there separate entitlement for each contract? m Does the worker receive their usual pay aggregated across the contracts or are there separate pay arrangements for each contract? Where the employer has determined that despite having multiple contracts a single employment relationship exists, this means they are treating the worker as having one contract. However, if the employer concludes that the multiple contracts do not constitute a single employment then they will need to treat each employment separately, practically speaking, as if they had a number of different workers. This is an important consideration, firstly when undertaking automatic enrolment duties, and secondly, when considering statutory payments and statutory leave.
PP Guidance Useful guidance can be found at:
l The Pensions Regulator website www.
thepensionsregulator.gov.uk
l HMRC’s website
www.hmrc.gov.uk/ employers/sml-salary-sacrifice.pdf.
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