Auto-enrolment for internationally mobile employees

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Employers’ obligations under auto-enrolment become even more complicated when it comes to employees who are globally mobile.

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  • The eligibility of employees coming to work in the UK, and or those leaving to work abroad, has to be assessed for auto-enrolment.
  • Employers should clearly document each step of the decision-making process when assessing these employees.
  • Mobile employees must be enrolled in a qualifying pension scheme as set out in the auto-enrolment regulations.

The new duties imposed on employers by auto-enrolment can seem overwhelming at first, particularly those relating to globally mobile employees. For many employers, it will be clear which staff fall into this category, but for larger organisations with employees working around the world, it can be a grey area.

Toby Christie, policy manager at The Pensions Regulator (TPR) says: ” One of the criteria employers will need to consider when assessing a worker to identify whether or not they are a jobholder is whether they are working, or ordinarily working, in the UK.

“For most employers, it will be clear that their staff are working in the UK. If an employee is not wholly working in the UK, they may, nonetheless, be ‘ordinarily working’ in the UK. The primary issue to consider is where the worker is based. This can be determined by looking at what their contract of employment says and how it operates in practice.”

Matthew Beaman, head of international pensions at Grant Thornton Employee Benefits Consultancy, says: “They could be expatriates or working abroad, or people that are mobile. It doesn’t mean they are in the UK all the time.”

Which staff are eligible?

An employer has a duty to assess its workforce to determine which staff are eligible for auto-enrolment. This must include all workers coming into the UK or those leaving to work abroad. “The first thing to do is assess every single category of employee,” says Beaman. “Employers have to go through the same procedure as they would with UK staff.”

This assessment must determine: where an employee begins and ends their week; where their private residence is; where the employer’s headquarters is; what social security system the employee is in (do they pay national insurance in the UK?); and what currency they are remunerated in.

Employers must also consider a number of matters specific to globally mobile employees. Simon Mayho, executive consultant, tax and pensions at KPMG, says these include the employee’s base: do they remain outside the UK or are they now in the UK? Is their contract with an overseas employer? And is there an expectation that the employee will return to another country?

“There will be people who do not easily fall within these categories, and it is those employers that have to go one stage further and decide whether they want to take legal advice about whether they should be in scope or not,” says Mayho.

Detailed account of assessments

It is important for employers to keep a detailed account of the steps they have taken to assess employees coming into and going out of the UK. Grant Thornton’s Beaman says: “The important thing is to have an audit trail, so the employer can demonstrate why it has treated that category of employees as it has. If it can demonstrate that it took a reasonable judgement, on the basis of evidence, that a person is not ordinarily working in the UK, it will be better protected.”

Employers then need to decide how best to create a strategy to manage this category of employee. Issiah Sakhabuth, principal consultant at Aon Hewitt, says a formal process is key to helping employers manage their auto-enrolment strategy. “An employer can design and document a strategy for what it will do with mobile employees and, from then on, if it has people who are in [auto-enrolment], and even for those who are out, it must have a process in place to monitor them and any changes. It needs to be consistent in respect of people coming in and those going out, treating them in a similar way.”

Employers also need to ensure that mobile workers deemed to be eligible for auto enrolment are enrolled in a qualifying pension scheme, as per TPR regulations. “These are relatively clear, but there are probably a lot of circumstances where an overseas scheme may not meet the criteria,” says Sakhabuth. “Employers may require advice from their pension provider, or legal advice.”

Staff transfers remove auto-enrolment obligation for Incisive Media

Incisive Media

With an auto-enrolment staging date of November 2013, Incisive Media is still some way from finalising its preparations and communications.

But with about 10 staff in each of its US and Hong Kong offices, the media company is aware of its obligations as an employer for its international staff.

Emma Cutbill, benefis manager at Incisive Media, says: “Some of our UK employees have transferred over to those offices. Because they are transfers, not secondees, it means they are on an employment contract with that country. So the US ones are on a US employment contract.”

Although they work for the same organisation, the overseas staff are now employed by the US company, not the UK one, so Incisive Media is not under any obligation to enrol them into a UK pension scheme under the auto-enrolment regulations.

Case studies: which employees qualify for auto-enrolment?

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One of the criteria employers need to consider when assessing a worker to identify whether or not they are a jobholder as defined in auto-enrolment regulations is whether they are working, or ordinarily working, in the UK. Here are some examples of employees who are ordinarily working in the UK:

  • Jon is an airline pilot, working out of London Heathrow. He flies long-haul journeys to the US, Canada and the Caribbean for Letsgetaway Airlines. The airline’s headquarters is at Heathrow and his contract of employment is there. He is away from home for four or fi ve days at a time. He lives in Reading and his employer pays him in sterling and deducts tax and national insurance (NI) contributions from his salary. In The Pensions Regulator’s view, Letsgetaway Airlines can consider Jon to ordinarily work in the UK.
  • Helena is a pilot for Herecomesthesun Airlines. She flies long-haul out of Heathrow to South-East Asia, and is away for four or five days at a time. She lives in Antwerp and commutes to Heathrow to start work. Herecomesthesun Airlines has offices based at Heathrow, but its headquarters are in Antwerp. Helena is paid in euros and does not pay NI contributions in the UK. In the regulator’s view, although Helena begins and ends her working activities in the UK, her employer can consider that she does not ordinarily work in the UK.
  • Charles works on a cargo ship for Le Cargo, a company registered and based in France. He lives in the UK and his contract states that he is based in the UK. A usual route for the cargo ship he works on starts in Felixstowe, then goes to Hamburg, Singapore and the US. The journey usually finishes in Southampton. In the regulator’s view, although Le Cargo is based in France, the other factors present are sufficient for Le Cargo to consider that Charles ordinarily works in the UK.

Example of a short-term placement outside the UK:

  • Steve works for GB Computers, a UK subsidiary of Global Computers, a US company. He has been seconded to the US headquarters for a period of five years. On GB Computers’ staging date, Steve is half-way through his secondment period, so GB Computers initially assesses him as if he were not on secondment. Before he went on secondment, Steve lived and worked in the UK, was paid in sterling and paid NI contributions. GB Computers therefore concludes that he is based in the UK. It then considers whether Steve’s base has altered as a result of his secondment. Steve’s contract has remained with GB Computers and, at the end of his secondment, the organisation expects him to return to work with it in the UK. GB Computers therefore concludes that Steve’s base remains in the UK and therefore considers him to be ordinarily working in the UK.
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