Smarter accounting

Sole Director Companies and Auto Enrolment

18 March 2017, Auto Enrolment, Employer

A company, or individual without employees is not required to have an Automatic Enrolment Pension Scheme.  Where a company has no-one on payroll and no workers it is normally clear that Auto Enrolment doesn’t apply.  The situation is less obvious with sole director companies and auto enrolment.  If you are the sole director of your company and have no staff or workers, the company does not have automatic enrolment duties.  Read on for a few more things that you need to consider.

Am I exempt from Auto Enrolment?

Directors of companies are known as office holders.  Most sole directors do not have a contract of employment, which means that they are not usually classified as workers for automatic enrolment.  Sole director companies are typically not subject to automatic enrolment, but if you engage “freelancers” in your business, even though you might not consider them as your workers, they may trigger auto enrolment responsibilities.

You won’t have any duties if you meet one of the following criteria:

  • you are a sole director company, with no other staff
  • the company has a number of directors, none of whom has an employment contract, with no other staff
  • your company has a number of directors, only one of whom has an employment contract, with no other staff
  • the company has ceased trading
  • your company has gone into liquidation
  • the company has been dissolved
  • you no longer employ people in your home (cleaners, nannies, personal care assistants, etc)

Multiple directors

If a company has more than one director, none of whom has an employment contract auto enrolment will not apply.  This changes as soon as you hire any other staff or have more than one director with an employment contract.

In the situation above where the company only has directors and not workers, the company will be exempt from auto enrolment where just one director has a contract of employment.  If more than one director has a contract of employment or there are additional workers, everyone with a contract is subject to auto enrolment and the company must have a compliant pension scheme in place.

Sole Director Companies and Auto Enrolment

The company can decide whether to include directors without a contract of employment in auto enrolment.  Many small companies will have staff subject auto enrolment and one or more directors without an employment contract.  The company must assess the staff, but can opt to exclude these office holders from the process.

What to do if you are exempt from auto enrolment

Even if you are exempt from auto enrolment, your company may have a PAYE scheme and pay you through payroll.  If you have received a letter from the Pensions Regulator and you are exempt from auto enrolment, you need to notify the Pensions Regulator here.

Should I set up a pension scheme anyway?

If your company is exempt from auto enrolment and but is likely to take on staff in the near future, it is advisable to set up a pension scheme so you have everything ready.  After you have reached your staging date, you will need to have a pension scheme in place by the time you hire your first worker.

Where can I get pension advice?

Only an Independent Financial Advisor (IFA) can provide pension and investment advice.  You don’t need to go to an IFA to select a pension scheme, but it is strongly recommended.  Once you have selected a scheme, you can set it up yourself, your IFA will be able to set it up or Alterledger can make sure you complete all the paperwork to ensure that you comply with the Pensions Regulator.

Fulfilling your obligations to the Pensions Regulator is not always straightforward and diverts you from your main business.  For more information on setting up your pension scheme and processing your payroll, please contact Alterledger on the form below.

Pensions Regulator links:

Staging date tool:
www.tpr.gov.uk/employers/tools/staging-date.aspx
The essential guide to automatic enrolment:
www.tpr.gov.uk/employers/e-brochure/index.html
Detailed guides for employers and business advisers:
www.tpr.gov.uk/pensions-reform/detailed-guidance.aspx
Information about declaration of compliance:
www.tpr.gov.uk/declaration
Letter templates for employers:
www.tpr.gov.uk/employers/letter-templates-for-employers.aspx
Choosing a pension:
http://www.thepensionsregulator.gov.uk/choosing-a-pension-scheme.aspx 

 

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