We have been asked whether a company with only directors on the payroll need to apply for a pension scheme under auto-enrolment?
Generally director only companies are exempt i.e. do not have to auto-enrol the director, not because a director is not considered to be a worker but because single-director companies have a specific exemption.
So if a company has one director that director is not a worker unless:
- the director is employed under a contract of employment; AND
- there is another person employed by the company.
What if the company has more than one director?
The key information is whether the directors have an employment contract.
If none of the directors have a service/employment contract, then you do not need to comply with auto-enrolment.
If only one director has a service/employment contract, then you do not need to comply with auto-enrolment.
If more than one director has a service/employment contract, then the company will need to comply with the requirements of auto-enrolment and set up a scheme.
What if you also have low-paid employees?
If you have staff, but they are all earning less than £10,000 per year then you don’t need to auto-enrol anyone. The company will need to provide those employees with information about their right to opt in or join a scheme. However, you don’t need to set up a scheme until one of your employees chooses to opt-in or join.
If you are a husband and wife company this may be your situation, in which case, just ensure the non-director spouse earns less than £10,000 a year.
If you would like assistance in working out your auto-enrolment responsibilities or in setting up a scheme, please call Clearways Accountants on 01737 244298.