Automatic enrolment: Do you know how and when to use postponement?
19 July 2016
Research by The Pensions Regulator (TPR) has shown that there is now almost universal understanding among business advisers of the tasks that need to be carried out for employers to comply with their automatic enrolment duties.
An area which continues to prompt questions from advisers is postponement – a useful tool for employers, especially those who employ temporary or seasonal workers. TPR has provided an article:
- An employer can temporarily postpone the assessment of workers for automatic enrolment purposes for up to three months.
- Postponement can be used for all of the employer’s staff or just some of them.
- If your client postpones from their staging date, the staging date does not change.
- If your client chooses to postpone from their staging date, they still have duties (e.g. they must write to tell the staff who will be postponed, within six weeks of their staging date).
- The declaration of compliance date does not change – this remains as 5 months after their staging date.
- Postponement cannot be used with re-enrolment. If the staff meet the criteria to be enrolled on the re-enrolment date, then re-enrolment must take effect from that date.
Why would an employer use postponement?
One of the main reasons your clients might decide to postpone the assessment of their workers is if they have temporary or short-term staff who they know will stop working for them within three months. For example, seasonal fruit pickers.
Using postponement can also be helpful when assessing those staff whose earnings would usually fall below the earnings threshold, but where an increase such as a bonus might temporarily take their earnings over the trigger level.
If your clients apply a probationary period to new starters, then it can be helpful to use postponement to delay assessing these individuals until after their probationary period is passed (assuming it is not longer than three months).
Your clients might also choose to use postponement in order to align automatic enrolment with their other business processes. For example, if your client’s staging date falls in the middle of a pay period, it may be helpful to postpone to the beginning of the next pay period.
When can postponement be used?
Your client can postpone automatic enrolment from:
- their staging date
- a staff member’s first day of employment
- the date a staff member first becomes eligible for automatic enrolment.
If your client postpones from their staging date, it doesn’t change their staging date.
Your client can postpone for up to three months. They can postpone as many or as few staff as they like and the postponement period doesn’t have to be the same length for everyone.
Note that staff can choose to opt in to your client’s pension scheme during the postponement period. More information on what to do if this happens can be found on TPRs website.
What action to take?
An employer can postpone an individual, some, or all, of their staff. If they do, they must write to these staff within six weeks of the date that postponement starts, to tell them:
- that their assessment has been postponed
- the end of postponement date, and
- that they have the right to opt in or join a pension anytime.
TPR have a sample postponement letter on their website that can be used to write to staff.
There’s no need to tell TPR that a client has decided to use postponement. And remember – the declaration of compliance date will not change.
What happens at the end of the postponement period?
On the last day of the postponement period, your client will need to know whether each staff member, whose assessment they’ve postponed, is eligible to be automatically enrolled – if they still work for them.
If they are eligible, your client must put them into a pension straight away. You cannot postpone again. This is true even if they postponed for less than the three months allowed.
However, if any are not eligible, then they will need to be monitored every pay cycle from then on, to see if they become eligible in the future. If they do become eligible, you could then apply postponement again in respect of them.
Common postponement questions
Can we use postponement more than once?
Yes, but only for staff who are assessed as not eligible to be automatically enrolled on the last day of the postponement period. Where a member of staff is eligible to be enrolled, you cannot postpone again and you must put them in a pension scheme (as explained above).
If a member of staff asks to join my pension during the postponement period, when do I start paying money into the pension?
If any member of staff writes asking to join a pension, you need to assess what they have earned and how old they are – in the pay period when you receive the notice that they want to join.