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Who is exempt from workplace pensions?

Understanding whether or not your business needs to sign up to workplace pensions might feel a little tricky at times.

While most businesses will already be at the point where automatic enrolment is an obligation, there are also many situations in which a business won’t have to do so. A common worry is not fully understanding a business’s obligations, and facing the risk of escalating fines from the Pensions Regulator.

Our guide on workplace pension exemptions will help you work out if you do or do not have any workplace pension enrolment obligations, and who among your staff will be exempt.

Who is exempt from workplace pensions?

Sole trader?

If you’re a sole trader with no other employees, you have no workplace pension obligations whatsoever.

Keep in mind, however, that your business might eventually grow, and you may not stay a sole trader for very long. Once you’re in a position where you need an additional member of staff to keep your business running smoothly, you cease being considered a sole trader.

Once you’ve hired a  new staff member, you are both considered employees by the government. As such, whether or not you decide later to opt out, you and all your employees will have to enrol into a workplace pension.  

Multiple directors with no other employees

One of the more interesting exemptions is when multiple people in the business are classed as directors, but there are no standard employees working for you. This might be the case for example in a family-run business..

If you are the director of your business and you hire an employee, then you’ll need a workplace pension.

However, if there are three people working in the business, for example, and all three are officially noted as directors of the company, there are no workplace pension obligations to meet.

None of these staff members will be considered employees by the government.

That said, despite being exempt from auto-enrolment, there is nothing to stop yourself and other directors choosing to take part in a workplace pension scheme if you’d like to get a head start on saving for the future.

As before, though, once a regular staff member is hired, all staff, directors or not, will have to be signed up to a workplace pension.

Different levels of annual wage

If you have any staff working for you part time, then there may not be any pension obligations for them depending on how many hours they work and what their eventual, pre-tax, annual salary is.

There are two main circumstances where your employees will be classed as exempt from automatic enrolment to a workplace pension:

If your employees earn either below £5,876 or between £5,876 and £10,000 annually, automatic enrolment into a workplace pension will not apply.

However, these staff members still have the right to ask for access to a workplace pension. The key difference here is that employers are not required to contribute to the pension fund for staff earning under £5,876, while they will have to contribute as normal for those earning between £5,876 and £10,000.

Staff who earn above £10,000 will have to be automatically enrolled as normal, but they can choose to opt out if they prefer.

How FSB can help with your workplace pensions

No matter how many of your staff choose to remain  enrolled in a workplace pension, making sure you’ve met your obligations when it comes to eligible staff  is vital to ensure that you avoid any costly fines.

FSB Workplace Pensions can help ensure the process of signing up to and offering a workplace pension is simple and efficient. Features and benefits of this service include:

  • A quick and easy set-up process, conducted over the phone with our dedicated team that takes only 30 minutes of your time.
  • Full support and 1-2-1 guidance throughout the entire process.
  • Optional ongoing support and scheme administration service from FSB Workplace Pensions including complete day-to-day management of your scheme for a small monthly fee.

To find out more about this service, which is available as part of our FSB Business Essentials package, take a look at our Workplace Pensions page or get in touch with a member of our team now.

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