Identifying your auto-enrolment workers! Great guest blog by Karen Prince

workforce assesment

This month sees the start of the final stage of auto-enrolment in the UK for more than 1.2 million employers. This last stage affects small and medium enterprises employing less than 30 staff. By April 2017, all businesses, including those who employ only one employee, will have to comply with the auto-enrolment requirements. This includes households employing carers and nannies.

Actions for Employers

You should:

  • begin by carrying out a workforce audit to assess your worker population. This is particularly important in the event of an acquisition. If your business cannot show compliance in the due diligence process, a potential purchaser will be held liable;
  • scrutinise the methods used to assess worker eligibility for auto-enrolment;
  • ensure you consider all individuals providing services to your organisation;
  • review periodically the status of individuals providing services. Relationships can change with time;
  • double-check individuals excluded because they are self-employed; and
  • consult your legal advisers if you are unsure of the status of any individual.

Employers, who mistakenly identify individuals as self-employed and exclude them from auto-enrolment, run the risk of the Regulator taking enforcement action (which can include fines) or taking remedial action (requiring payment of the unpaid contributions).

Auto-Enrolment Places Many Duties on Employers

You must:

  • enrol automatically eligible jobholders and non-eligible jobholders who opt into an automatic enrolment scheme. Broadly, they are individuals age 22 or over and earn at least £10,000 per annum in 2015/16;
  • pay minimum employer contributions or provide minimum benefits;
  • provide information to workers about their new rights; and
  • re-enrol eligible workers who opt out approximately every three years.

Your Work Relationship Is Key

In assessing which of your workers are eligible for auto-enrolment, it is important to identify whether the individual is a worker. A worker for auto-enrolment purposes is an individual who:

  • works as an employee (under a contract of employment); or
  • agrees under any other contract to perform work or services personally for another party to the contract (a contract of service); and
  • in doing so that other party is not a client or customer of any profession or business undertaking carried on by the individual.

The second part of this definition was the subject of legal proceeding. In the Hospital Medical Group Ltd v Westwood, the Court of Appeal considered the status of a self-employed doctor – Mr Westwood.

He provided hair restoration services to a clinic. In its marketing literature, the clinic described him as ‘one of their surgeons’. In addition, the clinic was not Mr Westwood’s client or customer. The Court held that although the doctor was not working under a contract of employment, he was an integral part of the clinic’s undertaking. He was not marketing his services to the public at large. Therefore Mr Westwood was entitled to make claims for holiday pay and unlawful deductions from wages when the clinic terminated his contract.

It is now clear that unless an individual promotes himself and works independently, he is likely to be classed as a worker, even if he operates in business on his own account.

Several Factors Determine An Individual’s Status

In assessing an individual’s status, it is the nature of the relationship that is important, not the title given to the individual. Workers therefore include trainees, agency and temporary staff employed by you.

There are a range of factors which can point to an individual being an employee. However, many relationships are complex, and individuals will show combinations of these factors. You must therefore consider all relevant circumstances in order to identify correctly each individual’s status.

Below are the factors indicative of employee status. These include:

  • mutuality of obligation – There must be an obligation for the individual to work for the employer and an obligation on the part of the employer to provide the individual with work (or to pay for the individual to be available for work);
  • significant control – Where an organisation decides what work is undertaken, how it is done and the means employed, as well as the time and place where that work is done;
  • providing a personal service – the individual has no right to provide a substitute;
  • remuneration by way of a fixed fee for a specific project, or an hourly or daily rate paid on submission of an invoice – As opposed to a fixed salary;
  • the absence of any financial risk or opportunity for profit – Independent contractors usually face some financial risk in providing services but they also have the opportunity to reap profit from their management of the services; and
  • paying national insurance contributions and income tax which is usually deducted at source – An independent contractor is likely to pay Schedule D tax and may also pay VAT (although this is not conclusive of self-employment for employment law purposes).

Karen Prince works for CKA systems. You can read all about her here

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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3 Responses to Identifying your auto-enrolment workers! Great guest blog by Karen Prince

  1. John mather says:

    You might add Check any fixed protection status of a member to the list

  2. Having read this I believed it was extremely informative. I appreciate you taking the time and effort to put this short article together. I once again find myself spending way too much time both reading and posting comments. But so what, it was still worthwhile!

  3. JanessaQlr says:

    After I initially commented I seem to have clicked the -Notify me when new comments are added- checkbox and from now on each time a comment is added I receive four emails with the exact same comment. Perhaps there is a way you are able to remove me from that service? Kudos!

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