Have you considered a workplace pension for your nanny, cleaner or housekeeper?
28th April 2016
Doubtless you will have seen some of the Government’s publicity surrounding workplace pensions, also known as workplace pensions. And you may have thought that, as your business obligations have been dealt with by your internal team, it does not apply to you. However if you employ anyone through your family (eg a nanny, housekeeper or cleaners) and they are not included in your business PAYE scheme, they may still be eligible for a workplace pension.
Auto enrolment (AE) has been happening for many larger companies (those with 250 employees or more) since October 2012. A further 770,000 employers who have between 1 and 30 staff must provide and pay into a pension for their employees over the next 18 months.
It might seem like a boring administration task, but it’s one that can land you in a lot of hot water if you don’t comply within the deadlines.
What is automatic enrolment?
Auto-enrolment is a new Government scheme that makes it compulsory for businesses to automatically enrol their employees in a pension scheme.
All employers will need to work out whether automatic enrolment applies to them. If you have at least one member of staff who is paid via a PAYE scheme, then AE duties apply.
What many people don’t realise is that families who employ staff, such as your spouse, nanny, cook or cleaner are treated as employees under the auto-enrolment rules, and you will be expected to provide and pay into a pension for them.
If you employ your spouse, have a nanny or cleaner and are unsure how the new legislation will affect you, here are some answers to your questions.
Are all family employed spouses, nannies, cooks and cleaners eligible?
Most will be. If your employee:
• is over 22 and below state pension age
• earns more than £10,000 per year
You will be required by law to pay to set up and pay into a pension scheme.
If your employee:
• is less than 22 years of age
• earns over £5,824 but less than £10,000
You are not required by law to set-up and pay into a pension. However, they are entitled to ask to be auto-enrolled. If they do, you are required by law to set-up a pension and contribute to it.
If you employ staff such as a gardener or window cleaner, you will not be required to enrol them, because in almost all circumstances they are self-employed and do not earn the majority of their income from your custom alone.
Can a worker opt-out?
Yes. However, workers cannot be asked to in any way. If found guilty of persuading an employee to opt-out and go self-employed, you can face a hefty fine.
When will these changes take place?
Auto enrolment is being brought in gradually. The date when the legislation will be applicable to you is called your staging date, and is calculated using the last two characters in your PAYE reference number.
We can find your staging date for you if you like. All we need is your Employer PAYE reference number. If you don't know your PAYE reference, it can be found on a P6/P9 coding notice or on your white payslip booklet P30BC.
What if I don't do anything?
The Pensions’ Regulator has compliance and enforcement powers to deal with firms who fail to comply on time. To date it has fined 1,594 firms a £400 fixed penalty, with a further 31 fined escalating penalties which range from £50 to £10,000 a day!
As accountants and business advisers with our own financial services team through Cassons Financial Planning Limited, we are ideally placed to provide a straightforward approach to help you review the impact of auto enrolment on your business and then help you with the implementation of the pension scheme. As experienced advisers to group pension schemes we are aware that the reality of implementation is much more complex than the bullet points above may suggest.
Your auto enrolment obligations then extend to your monthly payroll and through Cassons Payroll Bureau we will be happy manage your payroll.
We’d be delighted to give you a quotation to advise and set up your pensions scheme, and also your payroll. You may even choose to review your own personal pension at the same time!
Please contact us for further details.
All content is for general guidance only. It provides an outline, and may not include points which are important in your case. You should not rely on this blog without taking individual advice based on the full facts of your case. The information given was correct at the time of publication.