Auto Enrolment and Directors

After persistent lobbying, the government has now published a set of rules on whether directors are required to be enrolled in company auto-enrolment schemes. The latest development has been the subject of legislation which allows the company to exclude directors.

Before the latest change directors could be removed from the requirement if they did not have written or implied contracts of employment. Many directors of small companies do not have written contracts but whether implied contracts exist or not may be a grey area.

If there are only directors in the company and it is unclear as to whether there is a contract in place, then there are now two alternatives to alleviate the burden of auto-enrolment;

Option 1 – If there may be contracts of employment the new exception could be used. If the company then chooses not to have a scheme then the company would need to complete a ‘declaration of compliance’ after the staging date. The declaration would show the directors as employees, but that they had not been enrolled due to the exemption.

Option 2 – The company may conclude that there are no implied contracts and thus there is no requirement to set up the scheme. The company should still, however, inform the Regulator that the company has no duties under auto-enrolment.

Care should be exercised where a company with only non-qualifying directors decides it has no employees (and thus no duties under the legislation), and later takes on a member of staff as auto-enrolment would then subsequently apply.

Should you have any queries in respect of the effects of auto-enrolment on your business, then please contact us.