As we grow more affluent – British families are outsourcing many of their domestic duties
Many of the employers who will be staging auto-enrolment by the end of decade have no idea they have any duties to provide pensions. They may be coming to terms themselves with being caught up in auto-enrolment.
I am talking about the huge number of middle class people who – for reasons of convenience- outsource part of their domestic duties to people who – before the war- we’d have called servants and who we now call domestic employees.
The most common of this new breed of employee is the nanny, but – according to top recruiter Little Ones of London, it’s not just nannies who are in demand, housekeepers , gardeners , cooks and chauffeurs are all making it onto household payrolls.
A sophisticated employment market
To understand just how sophisticated a business this is, have a look at Little One’s website, especially this remarkable search engine. I visited one of Little One’s offices in central London, the reception was packed with people keen to be vetted and join the 3000 candidates looking for the position.
Supply exceeds demand with typically 1000 employers on the other side of the equation at any one time, but the turnover of jobs and candidates means that over the course of the year tens of thousands of employers will find staff who will go onto payrolls and ultimately be auto-enrolled.
This is the legitimate end of the market. At the other end are people placing adverts in shop windows and there is clearly a grey if not black market in labour, which Little Ones were clear to distance themselves from.
If employment is not through payroll , it is not employment seems to be the rule here
I asked Little Ones just how much help these domestic employers required in setting up the infrastructure of employment. Are these employers, as the Regulator has told me, unaware of their duties?
The answer was – it varied. Many of the employers are in professional services, typically accountants, lawyers and – yes – actuaries, in the Golden Triangle whose apexes are London, Cambridge and Oxford. But many of these cobblers could not mend their shoes and a great number of the new employers were quite unfamiliar with the costs of employment surrounding payroll.
Typically nannies move on to payrolls set up for them by Nanny Tax and the smaller Nanny Pay and are auto-enrolled into NEST – which is the Nanny’s default. This was confirmed to me by meetings with these payrolls early in the year.
There appears to be demand among employers for financial education on tax, national insurance, liability insurance, health and safety and (say it quietly) – pensions!
Pensions becoming a key part of the employment contract
Little ones seeing interest in pensions as not just a regulatory necessity arising from auto-enrolment. Awareness and engagement about pensions among nannies (and other domestic employees) is on the increase.
Traditionally these people had no rights to a pension but increasingly they are moving onto PAYE schemes already registered for auto-enrolment, the job comes with a pension.
As we move towards the end of the deferred staging process in 2018, all new domestics will get a pension as part of their job.
What is interesting is that many of these (especially nannies) are financially savvy and high earners. A top nanny can earn six figures for the more demanding job and while the bulk of nannies earn between £20l and £40k, they are typically “live-in” meaning they have net disposable income which otherwise would have gone on property.
For Little Ones, the quality of the pension offer is likely to improve the quality of the job offer. For good commercial reasons, they are encouraging both applicants and employers to pay attention to the pension. Hence our discsussions.
Nannies – doing it for themselves!
In an interesting article in Money Marketing, Sam Brodbeck suggests that Government are looking at empowering employees to choose their own pension. The article doesn’t quote any Government sources for this story but it certainly aligns auto-enrolment with freedom and choice increasingly available in other parts of pensions.
Nannies may know as much about UK pensions as their employers (probably not much) but they will have a great deal more incentive to pay attention to their pension than their bosses.
The one pension fits all approach adopted by nanny payrolls is fine for nannies for whom NEST is appropriate but many nannies have started already started their own pensions and few will have chosen NEST, some nannies (and I know one) take pensions so seriously that they are contributing in excess of the NEST maximum contribution.
If we are to engage and educate people about pensions, it is a shame that we cannot empower them to join a pension scheme of their choosing. Nannies are a prime example of this.
Is the market responding to demand or regulatory pressure – probably both!
The reason I was meeting Little Ones was because they felt that their nannies deserved better than to be shoe-horned into a single pension. They wanted to talk about ways of raising engagement with the pension rights nannies have or will have under auto-enrolment and their capacity to influence their employment contracts so that they could make best use of the available concessions (including the uplift in contributions that might result in salary sacrifice.
We also talked about educating employers about satisfying the need among nannies and other domestic employers for a better pension deal.
It strikes me that agencies like Little Ones , who are catching onto the Zeitgeist for workplace pensions and treating auto-enrolment as an opportunity rather than a chore, are in a strong position.
Little Ones of London appears to be acting in a fair and equitable way. While it gets paid fees by the employers of domestics, it recognises that the employees are critical to its success and rather than treat these employees as lumpen proles, it is treating each candidate with respect and admiration (as can be seen from its website).
We can ask no more of it. It represents the first stage in an employment process not just for nannies but for the new employers and it is very encouraging to see it is taking pensions so seriously.
If this is a sign of things to come, those who have strategic control of the auto-enrolment project should be breathing a sigh of relief.