The new laws will apply to many people who may not think of themselves as employers, for example individuals that employ domestic assistants such as nannies, or carers for elderly or disabled relatives. Sole traders and partnerships that employ anyone, even just one individual, such as a personal assistant, also need to take careful note of their obligations.

Who exactly is considered to be a worker or employee?

Anyone who has a contract of employment is considered to be a ‘worker’ (the term usually used in government literature relating to auto-enrolment). Agency workers may have a contract of this type with their agency, and so may need to be given access to a pension scheme.

Another important thing to consider here is that a contract does not need to be in writing. If there is a verbal agreement between two parties, where one party is to carry out work for the other, then this could constitute a contract of employment.

However, those that provide contract services via their own businesses are not considered to be ‘workers’. Private individuals will not need to enrol domestic helps if the worker provides their services via their own business, or via an agency.

If in doubt, companies and individuals should consider the following important considerations in determining whether someone is an employee or a contractor:

• Is there an obligation on the person to work set hours, or to accept work when requested to do so?
• Does the person report to a defined person within the organisation?
• Does the company provide the person with tools and equipment to carry out the work?
• Does the contract provide the person with employee benefits, such as sick pay, annual leave etc?

If the answer is Yes to any of the above, it could indicate that they are an employee.

Which employees are covered by auto-enrolment?

Whether the individual is an employee of a large corporation, or simply a domestic help employed by a private individual, then the qualification criteria are the same.

If a worker meets all of the following criteria, then they must be automatically enrolled into a company pension scheme, unless they explicitly decide to opt out:

• They are aged 22 or over but are below state pension age*
• They normally work in the UK
• Their earnings exceed the ‘earnings trigger’*

The state pension age and the earnings trigger will change over time. The state pension is currently payable to those aged 65 or over, but state pension age will rise to 66 in 2020 and to 67 sometime between 2026 and 2028. The earnings trigger for the 2015/16 tax year is £192 per week, but this will rise in future years.

The above criteria clarify which employees have to be enrolled in a pension scheme. Other UK-based workers aged between 16 and 74 must be allowed to opt in to a company pension scheme should they wish to do so. They must be made aware of the existence of the pension scheme and their right to opt in.

So for example, a 21 year old carer earning £200 per week, or a 25 year old carer earning £180 per week would not have to be automatically enrolled, but both must be permitted to opt in. A 22 year old carer, employed by a private individual, and earning £200 per week, would need to be automatically enrolled.

Care should also be taken to ensure employees who may not previously have qualified are automatically enrolled should their earnings increase to a level above the earnings trigger, or should they reach their 22^nd birthday.

When do companies have to have their pension schemes set up by?

Companies with 40 or more employees who meet the auto-enrolment criteria above should already have their pension schemes in place. Those with 30-39 such employees must do so by October 1 2015.

The ‘staging date’ (the deadline for commencing a suitable pension scheme) for companies with fewer than 30 qualifying employees depends on the letters in their PAYE reference. This category includes all individuals and companies that employ just one person. For some, the staging date has passed, for others it arrives later in 2015, and for all such companies the key date will be no later than April 1 2017. April 1 2017 is for example, the staging date for those without a PAYE scheme.

Exceptions to these deadlines are permitted for those whose first obligation to pay PAYE income was on or after April 1 2012. Depending on when they were established, the staging date will be between May 1 2017 and February 1 2018.

All employers must ensure they are totally clear as to when their staging date is. Details can be found at http://www.nowpensions.com/auto-enrolment-staging-dates/.

What contributions are required?

Currently, employers have to contribute at least 1 per cent of an employee’s qualifying earnings to the pension scheme. From October 1 2017 this will rise to 2 per cent and from October 1 2018 to 3 per cent.

The employee must contribute at least 1 per cent at present, and at least 3 per cent from October 1 2017 and 5 per cent from October 1 2018. The Government will pay 20 per cent of an employee’s contribution in the form of tax relief, so in effect they would only need to pay 0.8 per cent, 2.4 per cent and 4 per cent in the three periods.

Qualifying earnings are earnings between £5,824 and £42,385 (2015/16 tax year figures). Overtime, bonuses and commission are included in the qualifying earnings figure.

Exceptions

Employees who have opted out of a company’s pension scheme previously, or who are working a notice period before leaving the company, do not need to be automatically enrolled. Employees on fixed term contracts are not considered to be working a notice period, and so are not covered by this exception.

What if a company already has a pension scheme?

Any companies that already provide pension arrangements for all qualifying employees that are as least as generous as the minimum auto-enrolment requirements need take no action. However, if a company provides a scheme that is less generous than the auto-enrolment requirements, it must make the necessary changes to its scheme by the relevant time.

Read more:
How those employing just one person may need to provide a pension scheme

That is certainly true at least in the realms of small business funding, where new market dynamics have emerged and where recent changes have been dramatic.

Here’s a look at 4 of the most important trends in this context currently taking shape in the UK.

1 – Specialist lending

The retreat of big banks and mainstream lenders from the small business lending arena in recent years has left ambitious and perfectly viable companies having to look elsewhere to find the financial backing and the loans they need to make progress. As a result, demand for finance among small businesses is increasingly being met by relatively small-scale and specialised lenders who offer their services only to companies in a specific sector or field of operations. This increasing specialisation is a trend set to continue as awareness of trust in these services spreads among small businesses.

2 – Shift to online dealings

The Internet plays a part in our everyday lives in a myriad of ways these days and business financing is beginning to catch up with this very broadly impacting trend. There may always be a place for face-to-face dealings when it comes to agreeing business loans and financing but deals are increasingly being done online and that trend is only heading in one direction. The reason for this is not just that the Internet is all-encompassing in its reach and convenience but because it opens up the prospect of more tailored and specialist financial services being offered and accessed by small businesses that need them.

3 – Greater speed and simplicity

It is no secret that there has been a general reluctance among banks and other mainstream lenders to offer loans or financial packages of any kind to small business in recent years. Even for demonstrably viable and sustainable businesses the processes involved in applying for funding have become difficult in the extreme. No surprise then that these small businesses have been looking for and finding alternative funders who are able to offer much more streamlined and straightforward options.

4 – Crowdfunding on the rise  

Crowdfunding is a term and a process gaining traction both in the public imagination and in the real world of business finance. Once the dust has settled on the concept and its initial high profile success stories, it is likely that crowdfunding will come to take its place as one of a variety of new funding options available to small businesses as alternatives to mainstream lenders. In short, the crowdfunding sector will mature in time to become a realistic potential route to financing for more and more small business with great ideas and big ambitions.

Quite how each of these trends will develop in years to come remains to be seen but it seems very likely that they will all continue to grow and gather pace, particularly with the British Government having introduced legislation designed to oblige mainstream lenders to point their rejected business loan applicants towards the websites of alternative finance providers. Certainly, with the UK economy having returned to growth, there will be growing demand for loans and finance among ambitious small businesses around the country.

Written by Keith Tully; Partner at UK firm Real Business Rescue who specialise in corporate insolvency solutions and business finance.

Image: Finance via Shutterstock

Read more:
4 Key Ways Business Funding is Changing