UK employers will be required under The Pension Act 2008 to automatically enrol their staff into a qualifying pension scheme & to contribute to that pension. This includes families who employ nannies, cleaners & carers. Employers will be affected from June 2015. Even if your nanny is not an eligible job holder you must still make sure you have a pension scheme available.
For parents who employ nannies, the most practical current scheme is NEST (www.nestpensions.org.uk). Employers are obligated under the Pension Act 2008 to auto enrol whether the employee is temporary or permanent as long as they qualify as an eligible worker.
What is Auto Enrolment?
It is a scheme which the nanny is automatically enrolled into. This means that the nanny won't have to sign any forms or make any decisions about the pension as this is all down to the employer.
When will automatic enrolment affect nanny employers?
Automatic enrolment is being introduced gradually. The day the new legislation applies to you is called your Staging Date. This is the date, set by the government, from which employers are required to automatically enrol eligible employees into a qualifying workplace pension scheme. The employer's staging date will depend on certain criteria including when they started to employ and the how many employees they have.
Your staging date is decided by the last two characters in your PAYE reference.
If you started employing before 1st April 2012, you will not be affected until June 2015 at the very earliest.
When you started to Employ When the new legislation affects you
Between April 2012 and March 2013 1 May 2017
Between April 2013 and March 2014 1 July 2017
Between April 2014 and March 2015 1 August 2017
Between April 2015 and December 2015 1 October 2017
Between January 2016 and September 2016 1 November 2017
Between October 2016 and June 2017 1 January 2018
Between July 2017 and September 2017 1 February 2018
What if an Employer doesn't comply?
The Pension Regulator has the power to issue fines. They can issue a fixed fine of £400 plus a daily fine of £50 for every day that you are non-compliant.
What if my nanny doesn't want to enrol?
If your nanny qualifies you are legally obliged to enrol her.
The nanny can choose to opt out once she has been enrolled if they dont want to take part.
Who is Eligible?
With auto-enrolment all workers will need to be assessed and classified as one of three types of worker: eligible job-holder, non-eligible job-holder and entitled worker. There will also be a very small number of people who have no entitlement at all. These will people aged under 16 or over 75.
The main differences between the three types of worker are:
Eligible job-holders will have to be auto-enrolled onto a pension scheme.
Non-eligible job-holders do not have to be auto- enrolled but have the right to opt in to a pension scheme which the employer contributes to.
Entitled workers have the right join a pension scheme, but the employer does not have to contribute anything to the pension.
An eligible employee is one who :
Is not already in a workplace pension scheme
At least 22 years old
Has not yet reached State Pension age
Earns more than the minimum earnings threshold
Works or ordinarily works in the UK according to their contract
Type of Age Earnings Auto-
employee enrolled?
Eligible Job- holder 22-State Pension Age £9440 and over* Yes
Non-Eligible Under 22 or between £9440 and over* No
Job-holder State Pension Age and 75
Non-eligible 16-75 £5668- £9440* No
Job-holder
Entitled Worker 16-75 Below £5668* No
*Figures correct for 2013/14 tax year. These amounts may change each tax year
This means that if a family pays more than £182 per week* they will have to enrol their nanny into a workplace pension scheme.
Costs
Automatic enrolment will create an additional cost for most nanny employers. If you employ a qualifying nanny, you will have to contribute to their pension.
The amount put into the nanny’s pension pot will be a combination of the nanny’s contribution, the employer’s contribution and tax credits from the government. The percentage will be gradually increased until October 2018.
Contributions will be based on gross earnings and will include overtime and bonuses within the qualifying earnings band.
Date Employers Nanny's Government
Contribution Contribution Contribution
Current - Sept 2017 1% 0.8% 0.2%
Oct 2017 - Sept 2018 2% 2.4% 0.6%
Oct 2018 3% 4% 1%
The percentage contribution only applies to the nanny’s qualifying earnings. This is currently between £5668 and £41450 per year but will change in the coming years.
Is your nanny contracted in gross or net?
If your nanny is on a net salary contract you as an employer will be responsible for paying your nannies contribution as well as yours.
You could eventually be paying a 7% contribution.
If you have any questions about pensions for nannies please contact Nanny tax