The Pensions Regulator (TPR) in their last Quarterly Bulletin (ending June 2015) published Auto-Enrolment case studies of non-compliant Auto-Enrolment behaviour, in order to help other employers avoid these situations. In particular, concerns about employers not understanding contractual relationships in order to identify who is a worker, were highlighted. The TPR has seen a number of employers in the employment business sector failing to understand how their workforce is categorised under the legislation, in particular where workers’ contracts are non-standard.
The TPR says that when preparing for automatic enrolment, employment businesses should first identify whether a person is a worker. To do this, they need to understand their contractual relationships.
A worker is defined as any individual who: works under a contract of employment (an employee), has any other contract to perform work or services personally and is not undertaking the work as part of their own business.
Anyone who has entered into a contract of either type with an individual is an employer and is required to comply with the new employer duties. Zero hours contract workers are a category of worker employers will need to consider as part of their employer duties.
The TPR provided a case study involving an employment business that provided residential care workers on a temporary basis. The owners assumed that they didn’t have any duties because their workers were issued zero hour contracts.
In this example, the employment business was the employer because it issued contracts to each worker, including to those on zero hour contracts (ie, the workers weren’t self-employed). The contracts covered all work performed for different nursing homes they were supplied to, for as long as the worker remained employed by the employment business. The workers didn’t have to accept the work, but if they did, that worker had to turn up in person and couldn’t send a substitute.
As a result, the employer needed to assess them for automatic enrolment based on their ages, and how much they earn, in the normal way. The employer was issued with a Compliance Notice and a £400 penalty before they contacted the Pensions Regulator to check their understanding of the legislation, as a result of which they are now compliant.