Construction workers denied auto enrolment pensions plan

There have been reports of a drastic rise in the number of workers in the construction industry who are being moved into ‘umbrella’ companies in order to appear as not working full-time. This then means that employers can avoid enrolling them into a workplace pension scheme and ultimately save themselves money; all at the cost of the employee.

By being listed as self-employed, the actual employers can avoid paying NICs and auto enrolment payments, as being self-employed would pass this responsibility over to the employees themselves. Back in August 2015, Citizens Advice estimated that as many as 460,000 people could be, as they put it, “bogusly self-employed” and encouraged to register as such by their employer. In this instance, the ‘self-employed’ employee has to pay two lots of pension contributions, as they are deemed both the employer and employee in the eyes of HMRC.

Brian Rye, Acting General Secretary of UCATT had this to say:

“Frequently, workers are engaged on projects for less than three months, meaning companies are not obliged to offer the worker the opportunity to sign up for auto enrolment. This is creating large holes in workers’ pensions and creates the impression that it is not worth saving for retirement as the rewards are minimal.”

As the employer is forced to make both the employers and employees payments, at 1% each they are not too significant, however the minimum amounts are set to rise in 2018 to 5% in total and in 2019 to 8% in total. This is when employees in umbrella schemes may begin to feel the strain of having to fund the entire amount themselves, and then as a result opt out and stop saving for their retirement which could potentially cause financial problems later in life.

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