You can delay (or postpone) assessing and auto-enrolling your employees for up to three months – this is called the postponement period.
When you can use postponement
You can use postponement for one employee, a group of them or the entire workforce. It can begin:
- On your duties start date (this is the day your first member of employed staff joined the company)
- On the first day of employment
- On the day an employee turns 22, or their earnings increase to meet the minimum earnings threshold for auto enrolment – this is currently £10,000 for 2020/2021 tax year
Your postponement period must be no longer than three months. You don’t need to let The Pensions Regulator or your pension provider know if you’re using postponement. But you do need to write to the affected employees about this to let them know within six weeks of the start of the postponement period.
Please be aware, if you postpone auto enrolment for any of your employees, they still have the right to opt in to your workplace pension scheme during the postponement period. If they opt in, you must assess them and then auto-enrol them if they are a jobholder.
How postponement works
If you decide to use postponement, the first thing you’ll need to do is decide on your deferral date, which is the last day of the postponement period. This must be within three months of your duties start date.
Once you’ve done that, the next step is to issue a postponement notice. This will need to let all employees affected by postponement know that auto enrolment has been postponed, along with the date when they’ll be assessed. It must also tell employees the auto enrolment criteria that they’ll be assessed by, as well as let them know that they have the right to opt-in before their assessment date. You must make sure you send this within six weeks of the original assessment date.
The final step is to make sure that you assess your staff when the postponement period ends. All eligible jobholders must be auto-enrolled, and if an employee is eligible then further periods of postponement can’t be applied.
When might postponement be used?
Postponement can give you additional flexibility to auto enrol your employees at times that are better aligned to the needs of your business. You might decide to use postponement in any of the following scenarios.
When employing staff on short term contracts
Postponement can be used to avoid auto-enrolling employees who are hired on temporary contracts (if you’re employing them for less than three months).
Example: Steph, aged 23, is hired on a temporary contract
Steph has a temporary contract to work as an assistant manager at a tailor’s shop from July until September. Before tax, Step earns £1,400 a month – enough to trigger auto enrolment into the workplace pension scheme. Steph’s employer decides to postpone assessing her for auto enrolment until the end of her temporary contract. During this time, Steph can still opt in if she wants to.
Once Steph’s contract ends and she leaves in September, her employer no longer needs to assess her for auto enrolment at the end of the postponement period in October.
When employee earnings fluctuate
If your employees’ earnings fluctuate, making them temporarily eligible for auto enrolment, you might choose to postpone their assessment until their earnings are more reflective of their annual salary.
Example: Lucy, aged 25, has earnings that fluctuate
Lucy is 25 and starting work at a salon on 1st December. She often earns less than the £833 per month needed to trigger auto enrolment into the salon’s workplace pension scheme. However, Lucy works a lot of extra shifts in the run up to Christmas, meaning that her earnings are higher than usual.
The salon decides to use postponement and sends Lucy a postponement notice. She doesn’t exercise her right to opt in to the pension scheme. Lucy is then assessed in the new year, when her earnings are lower and don’t trigger auto enrolment. Lucy is still able to opt in to the pension scheme if she would like to.
To align starting auto enrolment with pay periods
If your duties start date falls in the middle of a pay period, you can use postponement to avoid having to calculate and make contributions for part of a pay period.
Example: Ben, aged 36, starts his new job part way through the pay period
Ben’s 36 and he’s just started a new job with a salary of £32,000 per year. He starts his employment on 19th September.
Because he starts his job part way through the month, Ben’s earnings won’t be enough to trigger auto enrolment into his company’s pension scheme – so they decide to use postponement.
The company issues Ben with a postponement notice on the 19th September letting him know that he’ll be assessed for auto enrolment on 1st October – the start of the first full month of employment for the company’s pay period. Ben doesn’t exercise his right to opt-in, so he’s assessed for auto enrolment at the beginning of the following month, when his full earnings make him eligible to be auto-enrolled.
When employees have a probation period
If your employees have to complete a probationary period before they start work on a permanent basis, you can choose to postpone auto enrolment until their probation ends. This is only possible for probationary periods that are no longer than three months.
Example: John, aged 43, starts a new job on a trial period
John starts work at an estate agent on 3rd March. Before he’s given a permanent contract of employment, he has to work through a two-month probationary period. John is 43 and earns £30,000 a year, which would be above the minimum earnings threshold to trigger auto enrolment into his company’s pension scheme.
John’s employer decides to postpone auto-enrolling him until they know if they’ll employ him on a permanent basis. They issue John with a postponement notice, and he doesn’t exercise his right to opt-in.
When John’s probationary period ends in September, his employer decides to offer him a permanent contract. By this point, the postponement period has ended, and John is assessed for auto enrolment. He’s auto-enrolled and decides to stay in the pension scheme.
In all cases, the employer needs to assess the employee at the end of the postponement period if they are still working for them, and auto-enrol anyone who meets the criteria at that stage.