23 May Are Directors exempt from automatic enrolment?
Are Directors exempt from automatic enrolment?
Good question – it could be yes or no – but it very much depends on how the director is classified. The Pensions Regulator (TPR) has made exemptions for directors in some circumstances.
Directors, even those who have a contract of employment, can still be exempt as they are not classified as a worker.
Only employers who employ ‘workers’ will have auto enrolment duties.
A director is defined as anyone who is ‘holding office’ as a director. Find out more here about ‘Office holders’
This does not include anyone who is a director in name only.
- For companies: A director is formally appointed under the Companies Act 2006 and also covers anyone who is acting as a director. Acting directors, appointed or elected, have the responsibility for determining and implementing the company’s policy.
- For corporate bodies: A director is anyone who holds an office of director created by establishing legislation or Royal Charter.
Directors as workers
Directors can be classified as a worker for automatic enrolment if:
- They have a contract of employment
- At least one other person (can be another director) also has a contract of employment
A contract can be either written, verbal or an implied contract. Where there is no written contract of employment in place or any other evidence of an intention to create an employer/worker relationship between the company and a director, The Pensions Regulator will not argue that an implied contract of employment exists.
A contract of employment does not have to be written down anywhere, it could also be either a verbal or implied contract. Where a person is a director of one company but works (i.e. an employee) for another company, then they are classified as a worker for that second company.
Directors with no Contract of Employment
Where a director does not have an employment contract, they cannot be classified as a worker and will be exempt from automatic enrolment. If a company has one or more directors who do not have contracts of employment and there are no other staff or workers then they will not have auto enrolment duties.
In these cases, although the company does not have to complete a declaration of compliance, they will need to communicate this to The Pensions Regulator.
Where a company does have other employees, they will be classified as an employer. Even if none of the staff qualify for automatic enrolment, the employer must still complete the declaration of compliance to inform the Regulator that they have complied and avoid fines.
The issue of directors and automatic enrolment is not a straightforward one.
You will find more detailed information available on employment status section of the GOV.UK website.