Auto Enrolment For Farmers

Another topical issue for many farmers at present is Pensions Auto Enrolment.  The Auto Enrolment provisions have now been in place for a few years, but for many businesses the Staging Date is calculated with reference to the number of employees within the business, so for many farmers and crofters, the Staging Date is now coming ever closer.

Under new legislation introduced by the Government, employers now have a mandatory duty to provide a pension for their employees, and to make a contribution to that pension, where the employee meets certain criteria.  The Pensions Regulator has written to every employer (and kept a record of who they’ve written to) to provide them with their Staging Date. This is the date that the legislation becomes live for you as an employer. Even if you don’t think you have any employees who qualify for a pension, you will still need to be able to demonstrate this to the Regulator.

The Regulator will issue non-compliance notices and fines and it’s therefore a costly mistake to make to ignore your employer duties.

The starting point is to work out whether you have any employees for whom you have a statutory obligation to provide a pension under the new regulations.  Where you have a current pension provision in place, you need to consider whether this will be adequate under the new regulations.  Where no pension provision has been in place previously, you will need to consider whether a pension is required for your employees, and then decide which of the available pension options you wish to use.  You may need to engage a professional to give you the advice you need in order to make an informed decision on your future provision, and it is worth bearing in mind that there will be a cost to this, both from the business adviser, and for set up costs for the new pension.

The Pensions Regulator site has many tools to help you through your auto enrolment journey, and there are a few key areas that employers may want to pay particular attention to. In particular, postponement can be of use within the farming sector – postponement doesn’t delay your staging date, but it does mean that you can delay the assessment of your workforce for up to three months. This allows employers to ensure that the worker is going to remain employed before having to make a pension contribution, which is of particular note within the Agriculture sector where the use of seasonal workers is very common – postponement will give you the opportunity to consider your seasonal workers, and possibly make different decisions for permanent staff.

Employers should consider what pensionable salary they will use for calculating pension contributions. Qualifying earnings may be useful where the workforce’s total earnings don’t change much, as the lower earnings threshold can be deducted. However, if basic salary looks to be more cost effective due to a lot of overtime/commission/bonus, especially at harvest time, employers need to be aware that the starting minimum contribution is 3% in total (2% from the employer), with a higher end percentage contribution required by April 2019.

Don’t forget that there’s statutory communications to be sent to the workforce too. Making workers aware of auto enrolment and what their contributions will be will involve workforce engagement.

With 500,000 employers due to stage in 2016, the enquiry levels at pension providers and business advisers will increase dramatically, and you may be left to battle through this minefield alone. Use the Pensions Regulator website, speak to your payroll people and take advice where you need it, preferably well in advance of your Staging Date.