Postponement is the decision to delay automatically enrolling an employee. It can be taken to mitigate the effects of spikes in earnings or to make administration easier. In general you can delay enrolment for up to three months following:
- Your staging date
- The date an employee first becomes an eligible jobholder, if this is after your staging date
- The first day of employment – new employees joining after your staging date
How postponement works
An employee is assessed as being eligible on day 1. This may be your staging date, your re-enrolment date, the date they join the company or the date they become eligible for another reason. You advise them that their auto enrolment is being deferred to a later date. This date may be up to 3 months after the date on which they are assessed as being eligible. On that date they will be assessed again and if they are still considered to be eligible, they are enrolled. If they are not, they will return to being non-eligible employees. Legally this process can continue indefinitely, although this may be undesirable from a management perspective.
NB: Non-eligible employees still have the right to request to be enrolled in a workplace pension, even during a postponement period.
Using postponement to manage irregular earnings
Unlike traditional pension schemes, the rules relating to workplace pensions require all income to be taken into account when assessing eligibility. This includes overtime payments, bonuses and commission and may include benefits. This means that employees can be assessed as eligible based on pay-reference periods which are significantly different to the pay-reference periods for the rest of the year. An example of this would be in retail where staff have overtime and bonuses for the Christmas period. By postponing their enrolment, employers have the opportunity to reassess eligibility in a standard pay month.
This system can work very well for employees who only receive irregular earnings occasionally. It can, however, be more challenging to manage a situation where employees hover around the point of eligibility and therefore continually receive notices advising them of their postponement. These situations may require proactive management on the part of management/HR to ensure that this never becomes a source of frustration to employees who may need to be reminded that they can choose to enrol in the pension scheme should they so wish.
Using postponement to manage administration
Another reason for using postponement is simply to make administration easier. After the initial staging/re-enrolment exercise it is likely that auto enrolment will be on a much smaller scale. Rather than enrolling employees as they become eligible, employers may elect simply to carry out all enrolments for a given period at a convenient time, often to align with payroll. This simplifies administration and therefore may help to reduce costs and, just as importantly, to reduce the likelihood of errors being made.
Postponement in practice
Postponement has to be handled on an individual basis so even if, for example, you take on a group of seasonal workers at the same time, you can’t just inform them collectively that they are all being postponed. Each employee must be given personalized information, within one month of the date when they would otherwise have been automatically enrolled. The notice must cover the following points:
- that their auto enrolment has been postponed
- the deferral date
- the fact that they will be auto enrolled if they are deemed to be eligible on the deferral date
- the fact that they may choose to join a workplace pension scheme during the interim period.