Breakdown of workers for auto enrolment.

Paul Weller’s song “Changing man” contains some insightful lyrics - “The more I know - the less I understand”. That sums up how some may feel about auto enrolment.

Take for example the classification of a worker; it’s not simply a case of someone who carries out a job for their employer. Oh no, for the purposes of auto enrolment it’s necessary to break the definition of worker down into three distinct categories. Once identified the employer can clearly see who needs to be auto enrolled into a pension scheme.

Just for clarity I have set out the three categories below:

ELIGIBLE JOB HOLDERS:

They are called this because they are ‘eligible’ for automatic enrolment’. These are workers who:

• are aged at least 22 and under state pension age
• are working, or ordinarily working, in the UK
• have qualifying earnings payable by the employer (in the relevant pay reference period) that are above the earnings trigger for automatic enrolment (currently £7,475).

NON-ELIGIBLE JOB HOLDERS:

They are called this because they are not eligible for automatic enrolment but can choose to opt in to a pension scheme and benefit from an employer contribution. These include workers who are either:

• • aged at least 16 and under 75.
• • working or ordinarily working in the UK.
• • have qualifying earnings payable by the employer (in the relevant pay reference period) that are above the lower earnings level for qualifying earnings (currently £5,715) but below the earnings trigger for automatic enrolment (currently £7,475).

or,

• • aged at least 16 and under 22 or between state pension age and under 75.
• • working or ordinarily working in the UK.
• • have qualifying earnings payable by the employer (in the relevant pay reference period) that are above the earnings trigger for automatic enrolment (currently £7,475).

ENTITLED WORKERS:

They are called this because they are ‘entitled’ to join a pension scheme; the employer does not have to make any contribution. These are workers who:

• are aged at least 16 and under 75
• are working, or ordinarily working, in the UK
• have qualifying earnings payable by the employer (in the relevant pay reference period) that are below the lower earnings level for qualifying earnings currently (£5,715).

If you’re already thinking this is a bit much, rest assured, tools are being developed by pension providers, such as our WorkSave Select tool, to guide employers through the process.

Tim Kehoe, Pensions Technical Analyst

Important note
This article provides the views of our auto enrolment team. The views are the opinion of the person writing the article and don't necessarily represent the views of Legal & General. They are based on their interpretation of industry developments and their current understanding of UK proposed and actual legislation, and should not be interpreted as recommendations or advice.