Auto enrolment is already happening for many larger companies. Another 770,000 employers who have between 1 and 49 staff must provide and pay in to a pension for their employees over the next two years.
What many people don't realise is that families who employ staff, such as nannies, carers, cooks or cleaners (you can find out more information on auto enrolment workplace pensions for nannies, personal carers, cleaners and other domestic employees here) are treated as employers under the auto-enrolment rules, and will be expected to provide and pay into a pension for them.
This has sparked fears of an employment black market arising from the auto-enrolment legislation, with cash-strapped families taking on nannies and cleaners on a 'cash in hand' basis to avoid having to pay into a pension. However, much of these fears arise out of a misunderstanding about the new legislation.
If you have a nanny, carer or cleaner and are unsure how the new legislation will affect you, here are some answers to your questions.
Are all family employed nannies, carers, 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 with you as their main employer
You will be required by law to set-up and pay into a pension.
If your employee
- is less than 22 years of age
- earns over £5824 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. Over 150 firms have been hit with such fines since the commencement of auto-enrolment.
When will these changes take place?
Auto enrolment is being brought in gradually. When the new legislation will be applicable to you is called your staging date, and is calculated using the last two characters in your PAYE reference number. A full list of staging dates are available here.
How do I set-up payments?
If you pay your employee through a payroll company, you may wish to ask them first as many will be able to set you up pension plan that will fulfill all the legal requirements of auto-enrolment. However, the responsibility still lies with you. If the payroll company fails to make payments, makes incorrect payments or fails to meet the auto-enrolment guidelines in any way, it is not them that is held liable under law it is you as the employer.
You can find out more information on automatic enrolment workplace pensions for nannies, personal carers, cleaners and other domestic employees here.