An Exemption under the Automatic Enrolment Legislation.
The legislation for Automatic Enrolment as part of the employers’ duties relating to Workplace pensions is long and detailed. The ‘detailed guidance for employers booklet’ published by the Pensions Regulator runs to 33 pages, and is something of a dry read, so if you need some help and guidance with the whole process, we suggest you talk to a specialist.
However, there are exemptions under the Automatic Enrolment Legislation, some of which are not widely known, one of which we detail below regarding directors of companies.
What happens if a company only employs Directors and not staff?
If a Company only employs Directors and not Staff, then that Company is exempt from having to Auto-Enrol the Directors into a Scheme, even though the Company will have been given a Staging Date. It boils down to the definition of a worker, which is someone who:
- works under a contract of employment (an employee), or
- has a contract to perform work or services personally and is not undertaking the work as part of their own business.
Therefore, paraphrasing the words of the Pensions Regulator:
- If an individual is a director of a company and the company has no other employees, then that individual is not a worker by virtue of any office that they hold or contract of employment under which they work. As a result, the company is not subject to the employer duties in relation to that individual, and is exempt from having to Auto-Enrol the director into a workplace pension scheme.
- Similarly, if the company has more than one director, but none of them have a contract of employment with the company, then none of the directors is defined as a worker and the company is not subject to employer duties in relation to those directors. But if two or more directors have a contract of employment with the company, those directors will become workers and the company will have automatic enrolment duties in relation to them.
- Where the company takes on one or more workers in addition to the directors, the company will have employer duties in relation to those workers, but will not have duties in relation to any of the directors, unless the directors have contracts of employment with the company.
There are other exemptions, including: serving members of the armed forces and office holders (such as company secretaries, non-executive directors, board members of statutory bodies and trustees), although office holders do sometimes hold contracts of employment that covers part of their duties, in which case they will be classified as a worker.
We can help clarify Automatic Enrolment Legislation
If you need some clarification on Automatic Enrolment, who is exempt and whom isn’t, just contact us or call us on 0121 693 0690. We’ll be happy to help.