Workplace pension reforms for staffing companies: Have you worked out the staging date from which you will have to enrol your workers?
10 May 2012
From October 2012, or fairly soon thereafter, Britain’s largest staffing companies will be required to automatically enrol all eligible workers into a qualifying pension scheme. Smaller and medium sized staffing companies will be required to follow suit at a later ‘staging date’, before September 2016. Unless the workers opt out the staffing company will have to make contributions of 1% (rising to 3% in 2017) of pay rate. Generally this cannot be deducted from pay: it will be an extra cost to the hirer or staffing company.
Each staffing company's staging date will be based on the number of "eligible workers" (including agency workers) on the staffing company's PAYE scheme as at 1 April 2012. For staffing companies all PAYE workers supplied on to third parties on this date will be included in the total number of people in their PAYE scheme. However, workers that the staffing company supplies to end users but who are paid by a third party (e.g. PSC contractors, or umbrella company workers) should not contribute to this number provided the PSC and umbrella arrangements are correctly structured. Whilst it is likely that for staffing companies the number of people in their PAYE scheme will fluctuate, any fluctuation will not affect the staging date, even if the change is significant.
To help your business prepare for auto-enrolment, you should now add up (a) how many PAYE workers your business had on assignment on 1 April 2012 and (b) the number of PAYE employees in your own organisation on this date. This will enable you to calculate the number of people in your PAYE scheme in order to determine your staging date. The Pensions Regulator has set out the 43 different PAYE bandings here.
Key actions for staffing companies now:
- Start alerting clients, and make sure long term appointments (e.g. PSL and MSP arrangements) do not tie the staffing company into swallowing the new cost.
- Take advice about models which may reduce or avoid pension costs.
- Make sure your PSC and umbrella workers will not count towards your number of eligible workers: make sure (if you don't want them included in your eligible worker figure) that they are engaged on a genuinely arm's length basis.
- Start discussing with your umbrellas how they propose to deal with auto-enrolment. Be aware that long term umbrella workers may, at the start of assignments, cost you more than new PAYE workers (who do not auto-enrol for 12 weeks).
- Make sure you understand the anti-avoidance provisions: "encouraging" opt out may trigger fines of up to £10,000 per day.
- Make sure your payroll systems will be able to cope.
If you would like any further information on this issue please contact Kevin Barrow or Frances Lewis.
Subscribe here for updates