Directors exemptions from automatic enrolment

Under the Pensions Act 2008 every employer in the UK must automatically enrol their qualifying workers into a workplace pension scheme. That’s fine, but what is the definition of a qualifying ‘worker’?

Logically, if a company does not employ any workers then it would be exempt from having to create a workplace pension scheme and does not need to complete a declaration of compliance. But would this apply to a company director? Under what circumstances is a director regarded as a worker?

Let’s start by defining a ‘director’ as anyone holding the office of a director. In the case of a company, this means that the director has been formally appointed under the Companies Act 2006. It also means anyone acting as a director in the sense of having a decision-making role in the governance of the company, even if they have not been officially appointed.

A director is only regarded as a worker for auto-enrolment purposes if

  • they have a contract of employment with the organisation and
  • at least one other person (who can also be a director) also has a contract of employment within the organisation.

Such contracts need not be written because verbal or implied contracts are also included.

Therefore, if a director does not have a contract they cannot be a worker and they are always exempt from auto-enrolment. Similarly if a director does­ have a contract, but there are no other workers with a contract of employment, the company is still exempt from setting up a workplace pension scheme. This remains true even if there are other members of staff, such as other directors, as long as none of them are working under an employment contract.

A one-person company with a single director is never considered an employer under automatic enrolment.

However, most directors do have a contract of employment and the organisations usually have other members of staff who are eligible to be enrolled into the workplace pension scheme. Primopayroll make compliance with auto-enrolment easy, automating the enrolment and communications with employees, reporting to HMRC and organising the payment of contributions for every pay period.  Contact us for further information.

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