The introduction of pensions auto-enrolment arguably has a greater impact on employees who are weekly paid, where a more hand-to-mouth existence and less sophisticated financial management might be prevalent, than with traditionally monthly-paid staff.
But without doubt, employers of weekly-paid staff will find compliance with the regulations extremely onerous.
Any employee earning more than £182 per week must be automatically enrolled, when eligible, with contributions being based upon earnings above £109 per week. With the current minimum wage at £6.19 for over 21 year olds, that equates to anyone working slightly more than 17.5 hours per week.
Employers must identify the pay reference period for their workers. This is the period over which they pay the worker and must be at least one week.
It would not be unusual for an employee to be paid on Friday for the hours they have worked since Monday, but the pay reference period extends all the way through to include Sunday. Contributions deducted from pension scheme members and those due by the employer must be paid by the 22nd (19th if by cheque) of the following month.
Members can opt out of the pension scheme within one month of the date they are supplied with written information about their auto-enrolment. This must not be more than one month after their auto-enrolment date.
In such cases, employers must refund to the member any contributions that have been deducted, less any tax due, within one month of receiving the opt-out notice or the last day of the second pay reference period. This is regardless of whether the money has made its way back from the pension scheme.
The refund is made net of tax relief for employers using a group personal pension plan as their qualifying workplace pension scheme. For employers using an occupational pension scheme, such as National Employment Savings Trust (Nest), the contribution refunded will be the gross amount, so organisations will need to ensure that the correct tax is applied before it is returned to the employee.
Ian Luck is financial services director at Smith & Williamson