Will Hotels be forced to enrol all staff in compulsory pension programmes?
17 October 2012
On 1 October 2012 Britain started introducing its new compulsory
pension system. This is designed to ensure that people who do not
currently save for their old age start saving through workplace
Which staff qualify?
Any "worker" aged between 22 and 65 and earning enough money to pay
income tax will have to be automatically enrolled in a pension
scheme. In the hotel and leisure sector this will cause some
employers real problems as their employees have fluctuating
earnings going above and below the tax threshold from week to week
or month to month. A "worker" is not just an employee -
agency and contract workers can be within the definition.
Workers who are too young, too old or do not earn enough must have
the option to voluntarily join the scheme.
When do I have to put the new system in
Because compulsory pensions is such a massive change it is being
rolled out gradually starting with employers with the largest
workforces in October 2012. Some of the smallest employers will not
be covered until more than 4 years later. For Hotels the start date
will depend on the size of their workforce. For a large hotel
employing 500 - 700 staff this will be 1 November 2013 and for
smaller hotels there will be more time.
Further help is given to employers by phasing the level of payment
they have to make. At first these will only be 1% of pay in
the National Insurance bands used for the UK social security
system. Once all employers have passed their staging dates they
will increase to 2% and then 3% of the same pay.
We already have a staff pension scheme, can we use
You can use any "Qualifying Scheme" - this is a pension scheme
which the employer uses to deliver compulsory pensions. It
can be an "occupational" scheme - this is the traditional UK model
of each employer creating a trust scheme for its own
employees. It can be a "personal" pension scheme where each
employee gets his own account to manage with an external insurer or
other financial services company. And now we have seen the
development of the "Master Trust" scheme - here a financial
services company develops a single scheme which lots of independent
employers can join giving them access to some of the governance
qualities of a trust scheme but with economies of scale not
available to small employers.
What do I need to do?
You need to work out the start date for your business and
commence preparations to get your scheme ready to receive the new
You may need to alter aspects of your existing scheme so that it
can be used. For a scheme to count as qualifying it must provide
for automatic membership meet certain contribution thresholds for
employers and employees. Employers with an existing scheme
may need to revise their rules to make it qualifying. For
instance, most have an application form system that will need to be
reformed. Amending an existing scheme can take time and can
require consultation. Data protection issues also arise as
the information collected at recruitment will be passed on to,
controlled and processed by the pension provider.
Hotel owners and operators will need to:
- first identify their staging date which they can do
- consider their HR and payroll systems including monitoring
workers' wage levels around the thresholds,
- review the use of agency and contract staff,
- amend their existing scheme to make it compliant
- review the way they structure their benefit
For more information please contact
Babette Märzheuser Wood, Head of
Hotel Group, or David Gallagher, Head of
Pensions Group or your
usual contact at Field Fisher Waterhouse LLP.