Pensions - Do Employees Have to be Auto-Enrolled If Not Based in the UK?
A recent High Court case has highlighted the need to clarify whether workers not wholly based in the UK are eligible for auto enrolment.
Eligible jobholders are auto enrolled by their employer when they reach their staging date. A 'jobholder' under the Pensions Act 2008 is defined as a worker who:
- ordinarily works in the UK under a contract
- is aged at least 16 and under 75
- is paid 'qualifying earnings' by an employer (gross earnings within the annually reviewed 'qualifying earning band')
The Pension Regulator's guidance notes: Assessing the work force : How to identify the different categories of workers (the Guidance) provides assistance on whether a worker is based in the UK.
A worker works wholly in the UK if their contract provides for the worker to be based at a location in in the UK and there is no simultaneous employment relationship between the worker and an employer outside the UK. It does not matter whether the worker occasionally takes business trips outside of the UK.
If the worker does not work solely in the UK, the employer should still establish whether they 'ordinarily work in the UK' for the purposes of auto enrolment.
The employer must consider several factors to find out where the employee is based in practice, rather than on paper.
In the Guidance, the Pensions Regulator suggests the following factors:
- where the worker starts and ends their week
- where the worker's private residence is located
- where the worker's headquarters are located
- whether the worker pays National Insurance contributions in the UK
- which currency a worker is paid in
For a worker on a short term placement outside of the UK, the employer must consider whether there is an expectation that the worker will return to work to the UK at the end of the placement.
The Regulator states in the Guidance that case law will develop further guidance on what it means to be 'working or ordinarily working in the UK'. A recent case has provided some guidance.
R (on the application of Fleet Maritime Services (Bermuda) Ltd) v Pensions Regulator
In deciding whether maritime workers for a Bermuda incorporated company were 'based' in the UK, the High Court looked at whether the workers habitually began and ended their tours of duty from a British port, irrespective of the duration spent abroad. Furthermore, a single tour cannot establish a base, therefore there should also be some degree of regularity.
Since the workers did not habitually begin their tour from British ports, the employer did not have a duty to auto enrol them into a pension scheme.