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 pensions.
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 place?
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 it?
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 entrants.
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,
- 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 packages.