Is postponing auto-enrolment right for your business?

As small businesses are drawn into auto-enrolment and beginning to appreciate the responsibilities involved, there can be a temptation to explore ways to delay or postpone your workplace pension obligations.

This isn’t surprising. Almost overnight, employers have been asked to become pension experts. The scale of the auto-enrolment task can seem overwhelming at first, so why wouldn’t you take advantage of the option to postpone?

We’ve seen information floating around online giving the impression that you can postpone for the long term, but this isn’t true. 

Here are the facts

  • Postponement allows you to delay assessing staff for up to 3 months as long as you tell them in advance: eligible workers must then be enrolled in a suitable pension scheme at the end of the period
  • It can only be used at certain times: For example, your initial duties start date (for those employed at that point), the first day of employment (for workers starting after the duties start date), or the day a worker first becomes eligible (turns 22 or earns enough in a payroll period) after the duties start date

Why might a business consider postponement?

  • To simplify the auto-enrolment process and allow different employee groups to be enrolled on different dates – this can be helpful when dealing with staff who have a one-off spike in earnings, or with temporary staff
  • To align auto-enrolment and payroll processes
  • To avoiding peak trading periods

Making workplace pensions work better for you.

Auto-enrolment pensions and Salary Exchange are set up and taken care of for you.

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The right way to deal with postponing auto-enrolment

If you intend to postpone auto-enrolment, you must inform all postponed workers within six weeks of the Postponement commencement date.

During the period of postponement, any employee can elect to Opt in to a workplace pension ahead of their auto-enrolment assessment. If they do this, you must fulfil your obligation by selecting a suitable scheme and allow them to start making contributions. Remember, choosing and setting up a good pension scheme can take longer than the maximum 3-month postponement period, so employers who haven’t done any preparatory work may find themselves under pressure.

While some situations merit the use of postponement, use it with caution and in an informed way

Too many businesses and their advisers think that postponement can be used after a couple of months to play catch-up, avoid backdating contributions or to roll back payroll. 

And that could prove costly.

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