Company wants to stop pension contributions

Arion

The company my wife works for (a medium sized partnership of solicitors, financial advisors and estate agents) is, like many others, going through the process of shedding jobs and reducing staff hours.

Now, in the midst of all this, they have sent a letter to all staff asking if they, the company, can take a 'pension contribution holiday'.

They have said each employee will continue to contribute, but the company will cease contributions for "...initially 6 months, possibly more.." then when the company returns to "...more prosperous times they will, if possible, repay the contributions missed..."

My initial reaction is NOT to agree. This so called 'holiday' could go on for years, and repayment is only "...if possible..."

Can the company legally ask this? What is the best advice here?

I also think it could affect the decision to make certain people redundant...so, at this time, it would seem unfair (but then again who ever said Solicitors were fair...).

Thanks in advance.

MarkyMarkD

This is no different to employers asking their employees to take a pay cut, as an alternative to redundancies.

It's not illegal. Pension contributions are optional.

But as they are part of your contractual pay package, they need your consent to stop paying them - which is why they've asked.

Would your wife rather have certainty of a job, with lower pension benefits, or the risk of redundancy?

Ian_W

Hmmm, the words "Rock" and "Hard Place" spring to mind, perhaps not just for your wife and her colleagues but also perhaps the firm as well.

Do you have legal expenses cover on your household insurance? Often this covers advice on employment issues so that may get you the definitive legal position at no cost to you.

I'm no lawyer but the position as I understand it is that no company is obliged to pay into a pension - but if it does, either as part of the contract of employment or by custom and practice, then if it unilaterally changes those terms of employment without meaningful consultation your wife may refuse and if she resigns or her employment is terminated she would have grounds to claim constructive dismissal. Perhaps that's why the letter is in the form of a request at this stage, to gauge reactions.

Thing is though, practically, in the current climate would your wife want to leave employment with the firm? If no, then is cutting back their pension contribution any worse in real terms than if they cut her hours? It's certainly a damn site better than if they cut her job!

Given that workers all over the country are accepting pay/hours cuts to keep their jobs maybe the best you can get out of this is a firming up of the promise to repay the contributions when things improve.

Sorry if what I've posted isn't what you might want to hear.

EDIT to add: MarkyMarkD posted as I was typing but is saying much the same - only shorter!

dunstonh

From 2012 they will have no choice but to pay into the pension. Holidays will not be allowed. So, if you do go down this route, it may be worth asking the question that what if it was to happen again after 2012 when they cant take a pension holiday?

JayZed

I think the above responses have pretty much covered it, but the thing that concerns me is that the proposed change to the employees' contract terms seems very vague and open-ended. If I were in the employees' position I would expect something much more precisely defined, e.g. "we will cease to make contributions for six months and will then resume payments". If they want to increase the suspension they'd have to get fresh permission from employees.

I would also want the employer to explore alternative options, e.g. temporarily reduced working hours (which I personally would prefer to suspended pension contributions).

MikeJones_2

Interesting, as I wrote a short blog on the same subject yesterday and a link to an article in the press about precisely this subject.

- Cutting pension contributions: what employers need to check

The blog contains a link to the relevant DWP Guidance on Employer Consultation requirements for certain situations.


Mike

Debt_Free_Chick

As Mike points out in his blog, this is a legal quagmire.

Most contracts do not specify pension contributions - just that you have the option to join a pension scheme, subject to the scheme's rules. However, the contract or offer letter usually encloses details of the pension scheme and legal opinion is divided on whether the pension scheme details actually form part of the employer's contractual obligations or not. There is no clear answer as there haven't been cases tested in the Courts.

As others have said, there's a practical side to this as well - if the company is so desperate to cut overheads that it reduces its pension contributions, then it could well be a case of "pension or job?".

It might be worth asking what happens to any missing contributions if an employee is made redundant before the company resumes payment. It would seem unfair for the employee to lose them when the company instigates redundancy, therefore denying the employee the opportunity to stick around and see if the arrears are paid.

Not a nice situation - no easy answers I'm afraid.

MarkyMarkD

Pretty obviously (to me) the "arrears" won't be made up if the employee leaves in between - whether at their own volition or the employer's. The pension contributions aren't being built up as arrears, they are being waived on a promise that the employer will make them up later. And that promise is not legally binding but merely a moral one.

Arion

Apologies for the delay in answering....my broadband is on the blink, so I quickly running this off at work.

Many thanks to you all...you're right it is a bit of a quandry.

I think perhaps, because the 'promise' of repaying is "moral" and not legal, it might be prudent to suggest a cut in hours instead of a cessation of pension contributions with no end date.

Anyway, thanks again...I will take all your suggestions to my wife and let her mull it over.

Arion

stemjoly

I guess that it's worth asking the company if there is any middle ground - so reduced contributions rather than no contributions. Worth also checking terms and conditions of employment to see whether a rate of contributions is specified, and what needs to happen to make a change.

Your wife could ask if the company would consider introducing a salary sacrifice arrangement and pay its NI savings into her pension account. That won't make up for losing the company contribution but would get a little extra going in. [There is a separate area in the forum explaining salary sacrifice]