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• Staging dates are when employers must begin the auto-enrolment process for eligible staff into a qualifying workplace pension scheme.
• Employers’ staging dates are determined by the number of staff members employed at April 2012 and their pay-as-you-earn (PAYE) reference.
• Staging dates for employers with 249 staff or fewer have been pushed back.
• In big corporate structures, dates may depend on where staff contracts are held and how the PAYE is set up.
Case study: Jupiter Hotels finds auto-enrolment schedule hard to check out
National hotel chain Jupiter Hotels operates 26 sites under the Mercure brand in the UK.
Auto-enrolment is set to have a significant impact on Jupiter Hotels and the government’s initial indication it would delay staging dates for organisations employing fewer than 3,000 staff caused potential difficulties.
Because of the complex make-up of its workforce, and high proportion of staff with irregular work patterns, Jupiter must monitor the earnings of entitled workers during the relevant pay reference period.
If an employee’s earnings exceed the auto-enrolment threshold in that period, which they often do, the employer’s duties in relation to that worker will change, bringing a greater cost burden.
Janet Gray, HR director at the hotel chain, says the lack of clarity around revised timescales for staging dates prior to January made this requirement hard to monitor. “The processes involved in preparing for auto-enrolment are far from straightforward in our case, and the absence of a target date to work to complicated matters,” she says.
DB schemes and auto-enrolment
Here is a guide to how defined benefit (DB) pension schemes fit into the auto-enrolment regulations:
If a qualifying DB scheme is open for further accrual and new entrants, then, assuming it is qualifying, employers do not have to start auto-enrolment, irrespective of their size, until October 2016. Auto-enrolment then occurs in the same way as in defined contribution plans for all staff.
If a DB scheme is not open to all employees, then those not in the DB category will be auto-enrolled from the staging date, based on the employer’s actual size, into an alternative scheme.
If a qualifying DB scheme is simply open to further accrual, active members do not need to be auto-enrolled, but all other staff need to be auto-enrolled into an alternative scheme from the staging dates.
If a DB scheme is open to new entrants and further accrual but then closes after October 2012, auto-enrolment is required from the employer’s staging date or the date it has been agreed the scheme is to be closed, whichever is the later.
Much confusion has surrounded the staging dates for employers to auto-enrol staff into a pension, says Tom Washington
It’s going to be a big year, with the Queen’s Diamond Jubilee celebrations in June and the London 2012 Olympic and Paralympic Games in July. But the main date pension professionals are interested in is probably their auto-enrolment staging date, whether it is this year or further ahead.
Within many large employers, preparations for the big day are already well under way, with the government’s auto-enrolment regulations coming into effect from October.
But for smaller organisations, delays in staging dates and complex employer categorisation have led to confusion and hesitation.
Staging dates refer to the day an employer must begin the auto-enrolment process for its eligible staff into a qualifying pension scheme. Each employer will have its own staging date, determined by the size of its pay-as-you-earn (PAYE) scheme in April 2012. The first to comply will be employers with more than 120,000 staff in October this year, and the process will be phased in over five years for all other employers. Stiff financial penalties will apply for non-compliance.
Last November, the auto-enrolment timetable was extended for small employers. This followed pressure from business groups that said it was bad timing for small- and medium-sized enterprises (SMEs) to take on the additional cost involved in the current financial climate.
In January 2012, the government confirmed a revised timetable of dates by which employers must comply with auto-enrolment. Those with staging dates on or before 1 February 2014 are unaffected. Employers with between 50 and 249 staff have been given new staging dates between 1 April 2014 and 1 April 2015. Those with fewer than 50 staff will now not have to meet auto-enrolment requirements before 1 June 2015. These employers have been allocated staging dates between that date and 1 April 2017.
Keen employers can bring their staging date forward if they wish, but they must inform The Pensions Regulator in advance. Their new date will have the same legal effect as their original staging date.
Liable for contributions
Paul Goodwin, director of workplace savings at Aviva, warns that getting to grips with staging dates is not just about avoiding penalty fines. “Employers that do not start auto-enrolment from their staging date still remain liable for contributions,” he says. “As they have not deducted any employee contributions when they should have done, the employer will be liable for the whole amount, including backdated employee contributions, and will pay interest on late payments.”
Typically, larger employers are well briefed on staging dates and their financial impact, but smaller employers – perhaps with fewer resources to prepare for auto-enrolment – are lagging behind, says Malcolm McLean, consultant at Barnett Waddingham.
Laura Freeth, customer relations manager at the Pensions Trust, says adjusting the staging dates for smaller employers will have no effect on the objectives of auto-enrolment. “One of the primary drivers for introducing this legislation is to reduce the likelihood of poverty in retirement,” she says. “Changing these staging dates does not move away from that, but does allow smaller employers more time to consider their preparations.”
For employers planning to increase or decrease staff numbers between now and April, there are some key points to note.
John Foster, benefits consultant at Aon Hewitt, says that for an acquisition to result in a change of staging date, both parties’ PAYE schemes would need to be merged. “If the PAYE remains separate, the staging date relates to the largest employer,” he says.
For employers that are taken over through an acquisition and effectively cease to exist, the staging date of the acquiring company will apply. If an entirely new entity is created by a merger, it will be seen as a new employer and be given a staging date in the normal way.
Employers that operate within a complicated corporate structure must look closely at where their employees’ contracts are held and how their PAYE scheme is set up, says Alan Morahan, principal at Punter Southall. “If the contracts are held at parent company level and there is just one PAYE scheme, the staging date will be determined by the number of staff in that scheme,” he says.
“If contracts are held at individual company level but they all share the same PAYE scheme, the size of that scheme would determine the staging date. But if a group of employers operate one or more PAYE schemes not shared with others in the group, their staging dates will be determined by the largest PAYE scheme in operation.”
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