Family companies and auto-enrolment
You might be the only director of your company or perhaps your spouse and other family members help control it. Whatever the situation you need to consider if auto-enrolment applies. What’s the position for your family company?
Not optional
Where auto-enrolment applies, it’s not optional. An employer must enrol all eligible employees into its workplace pension. The only exception is where employees voluntarily opt out. Employers, including small family companies, must assess if each of its employees is eligible, or could become eligible, for auto-enrolment. This can be an arduous task especially as this has to be regularly reviewed. However, there are exceptions.
One-man bands
If you’re the sole director of a company and you don’t have other employees, auto-enrolment doesn’t apply to your business.
Tip. If yours is a one-man company and The Pensions Regulator (TPR) contacts you about your auto-enrolment obligations, complete an online form to notify it that your company is outside the regime
Husband and wife companies
The position for husband and wife companies can be slightly more complicated:
o if you’re both directors and don’t have contracts of employment in place, auto-enrolment doesn’t apply. The position is the same if you’re both directors and only one of you has a contract
o if one of you is a director and the other an employee auto-enrolment applies in respect of the employee only
o if the director also has a contract of employment, auto-enrolment applies in respect of both the employee and the director.
Where auto-enrolment applies, check what initial steps you need to take by referring to The Pension Regulators online guidance.
What about larger family companies?
The position here is similar to that for husband and wife companies. Your company might consist solely of family members who are:
o all directors; or
o a mix of directors and employees.
Alternatively, while controlled by your family it might have some non-family directors. The key to deciding whether auto-enrolment needs to be considered is whether or not employment contracts exist. If they do then auto-enrolment applies.
All companies
As a general rule if a company has only one director with an employment contract, sometimes called a service contract, auto-enrolment doesn’t apply. Conversely, where two or more directors have contracts, auto-enrolment applies and you must decide if those directors with contracts are eligible to be included in your workplace pension.
Note. If your company has employees who are not directors auto-enrolment will always apply regardless of whether or not they have contracts.
Please give us a call, or drop us an email, at A&C Chartered Accountants if you want to discuss further using our Contact details.