Auto enrolment challenges: weekly paid employees

It has now been over a year since auto enrolment was first introduced to some of the largest employers in the UK. While many smaller businesses should be starting to prepare their processes, it is useful to look at challenges faced by those already complying with the legislation. One key issue which has been raised is the challenges faced when it comes to employees who are paid weekly.

To be classified an “eligible jobholder” and therefore qualify to be automatically enrolled into a workplace pension scheme, a worker has to meet certain criteria, one of which is that they earn above the minimum earning threshold.

So why does this cause problems for weekly paid employees?

Weekly paid employees will often work varying hours, meaning that the amount they are paid each week will fluctuate. This means that their eligibility for auto enrolment is also prone to change frequently.

One week they may earn enough to qualify, and their employer will be legally obligated to automatically enrol them into a pension scheme. The next week however, they may earn below the threshold and therefore not be eligible.

This constant fluctuation, combined with the tight timescales involved in processing pay and pension contributions could cause payroll teams to see an increase in their workload.

One way some employers have been dealing with this issue is by using postponement to defer assessment of certain employees’ auto enrolment eligibility. This has been especially popular when dealing with temporary staff, who may no longer work for that company at the end of the postponement period.

Some employers are using the introduction of auto enrolment as a reason to move away from weekly pay cycles. Companies who do not see this as a viable option however, need to ensure they start planning as soon as possible to ensure their processes and internal systems are prepared.

Have you started preparing for auto enrolment? Why not take the first step and read our free introductory guide?