I promised in my last post that I would start to flesh-out some of the info I gathered from my meeting with NEST yesterday. Important that you note the caveats from that post as well (see this link which explains the difference between NEST and Auto-enrolment, and where we stand with this passing into law https://www.jelfgroup.com/blog/2010/12/my-meeting-with-nest-today/).

So, assuming that we are now all on the same page, let’s look at one of the major areas of uncertainty for employers. How, and when, do you enrol an ‘employee’ who is not on a set level of salary? So this could apply to temporary workers, seasonal workers, employees who are only paid on commission and/ or zero hour workers in some cases.

Having discussed this yesterday, there are a few options.

The first, and possibly easiest, is that you opt to enrol all new employees automatically into NEST from day 1 (or at any time up to the three month enrolment window), and just start making employer contributions (and deducting employee contributions) in the months when the income payment level triggers a payment (i.e. when the income passes the relevant trigger points). The actual mechanics around payroll deductions and employer contributions will probably sit with your payroll provider. As an aside, the payroll providers still give the impression of being massively behind the curve in creating, and testing, solutions to this new pay element.

But there are other options.

If the employee has worked for the employer prior to the auto-enrolment date, this can be used as a ‘pay reference period’, and the variable income received over that period can be averaged, and this used to define if the employee should be auto-enrolled.

The above does, of course, not allow for a new employee. So how could a pay reference period be used here? The possible option suggested to me yesterday is that the employer uses the maximum 3 months waiting period before auto-enrolment takes place to create a pay reference period, and then make an auto-enrolment decision based on the pro-rata salary for that period.

Both of the last two options look possible, but administratively cumbersome. They also carry the possibility of getting the auto-enrolment decision wrong, and there are potential fines for non-compliance that sit alongside such failures. In practice, and although it’s likely to cost employers more in pension contributions, I would think the more common approach is likely to be the straight-forward ‘enrol every employee’, but we shall see.

As mentioned previously, none if this is definitive yet, but at least we are starting to get some strong guidance on the likely outcomes.

I will add other updates from my meeting next week.

Best regards

Steve