New Pension Rules.

kevs. · 15 March 2017 at 2:22PM

I own a sandwich bar, I have four members of staff, 2 full time and 2 part time.

The profit is not massive, but I make a living and pay the girls the minimum wage. However, the new Pension rules are a real worry, I just can't afford to contribute to it, but I have read that I have to offer it to at least the full time staff.

I don't want to lose staff but I may have to down size in order to pay a pension. I have tried to get help from the government website but it doesn't really cover what to do if you can't afford to pay it. Help would be appreciated.

molerat · 15 March 2017 at 3:19PM

There is no option not to afford it, I am afraid it is just another cost of being an employer.

Number75 · 15 March 2017 at 3:45PM

My husband runs a small business, similar situation that it pays him and his staff (above minimum wave though) but there is no profit after that. In fact due to previous problems he draws a lower salary than some staff for a period. He's putting prices up.

spadoosh · 15 March 2017 at 4:21PM

We employ about 50 staff, about 20 qualify for auto enrollment. Of those 20 we pay about £300 per month in total contributions. That averages £15pp, of which the employee pays just under half from their salary. When its running full whammy (3% from 2019 on) thatll be a cost of about £22.50 per employee to the company per month.

Its not massively expensive but understand on fine margins its an unwanted cost.

Essentially on minimum wage auto enrolment will only become effective when working 25+ hours a week or more.

Theres probably a direct correlation between auto enrolment and the increase in zero hour contracts.

lavvy · 15 March 2017 at 6:47PM

I have a friend who is in the same position, he employs six full time staff, his turn over is so small he would be working at a loss. Being an employer nowadays has so many pit falls it's sometimes not worth it. I think he is going to try and talk his staff out of joining by offering them a small pay rise, which will be less than the pension contribution. His staff are all in their early 20's so pensions are not something they worry about. If he can't get it to work he will have to cut their hours and make them part time. He hasn't discussed it yet but that is his plan. It's such a shame but he believes that the whole system has not been very well thought out.

xylophone · 15 March 2017 at 7:00PM

I think he is going to try and talk his staff out of joining by offering them a small pay rise, which will be less than the pension contribution. His staff are all in their early 20's so pensions are not something they worry about

http://activeenrolment.co.uk/my-staff-dont-want-a-pension/

http://www.thepensionsregulator.gov.uk/en/employers/what-happens-if-i-dont-comply.aspx

LXdaddy · 15 March 2017 at 7:27PM

lavvy wrote: »

... I think he is going to try and talk his staff out of joining by offering them a small pay rise, which will be less than the pension contribution.

That's not a very thing to do - it will get you into deep do do. So don't.

MoneySavingUser · 15 March 2017 at 8:51PM

kevs. wrote: »

I own a sandwich bar, I have four members of staff, 2 full time and 2 part time.

The profit is not massive, but I make a living and pay the girls the minimum wage. However, the new Pension rules are a real worry, I just can't afford to contribute to it, but I have read that I have to offer it to at least the full time staff.

I don't want to lose staff but I may have to down size in order to pay a pension. I have tried to get help from the government website but it doesn't really cover what to do if you can't afford to pay it. Help would be appreciated.

Have you worked out how much it will cost exactly?

Example - employee earns £20,000 per year
Qualifying earnings start at £5,824/year so pensionable pay is: £14,176 of which you have to pay 1% as the employer which is: £141.76 per year which is £11.81 per month which is tax deductible so lets assume you pay tax at 20% the real cost is then £9.45 per month

I assume your staff are all on this amount or less as a salary?

lavvy · 16 March 2017 at 11:52AM

In that case I would probably just tell the staff that you are making them all part time, that way it would prevent you having to pay into the pension. It may be harsh but if they are offered the choice of no job or part time work it's a no brainer. Maybe they could claim working tax credits. There has to be a way round it.

molerat · 16 March 2017 at 12:55PM

lavvy wrote: »

In that case I would probably just tell the staff that you are making them all part time, that way it would prevent you having to pay into the pension. It may be harsh but if they are offered the choice of no job or part time work it's a no brainer. Maybe they could claim working tax credits. There has to be a way round it.

Only by cutting them down to below 15 hours per week (at minimum wage), above that they have the right to the pension and employer payment if they ask. The absolute minimum hours for WTC is 16. I can see the headlines in the local rag - "Mean Sandwich Shop Owner Cuts Staff Hours To Avoid Paying Pension" - the pension payments would likely become the least of their financial worries.

lavvy · 16 March 2017 at 2:05PM

What a ridiculous reply. After all these days teenagers are lucky to get a job at minimum wage, the ages range from 18 - 22, are you seriously telling me that at that age you were bothered about your pension. Any way it was the OP who had a sandwich bar, not my friend. These days it's not surprising zero hour contracts are popular with employers.

New Pension Rules.

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