Workplace pension or pay rise - given decision to make.

wotsthat

PensionTech wrote: »

The employer's ability to award pay rises may be hampered by the requirement to pay pension contributions and corresponding impact on their overall costs - but they are not allowed to use this to discriminate on an individual basis

A company can give smaller pay rises because they have less money but aren't allowed to say so up front?

Seems a little disingenuous of the government to ban employers from telling their staff the money tree doesn't exist. I suppose it perpetuates the myth there's free money on offer which keeps the opt out rate low and increases pension saving rates.

hugheskevi

A company can give smaller pay rises because they have less money but aren't allowed to say so up front?

Seems a little disingenuous of the government to ban employers from telling their staff the money tree doesn't exist. I suppose it perpetuates the myth there's free money on offer which keeps the opt out rate low and increases pension saving rates.

The key point is that nothing can be conditional on the employee opting-out of the pension. Beyond that, the employer is free to do as they wish. This ensures employees will be better off by being in the pension, which is the purpose of the policy. An employer could decide to reduce salaries across the board (subject to contracts) due to higher pension payments, and as long as nothing is conditional on the member opting-out that is fine and they can tell staff why they are reducing their salary.

It is not about pretending there is free money, but about ensuring employees do not face incentives to opt-out. DWP have publicly estimated that 50% of the costs of extra pension saving will be offset by employers through things such as reduced pay awards in future (source here).

Credit-Crunched

Also a small point to note, the employees do not 'opt int' everyone who is over 22 under SRA and earns more than £10,000 is automatically opted in. The choice is then to opt out, or remain in.

So, the employer HAS to opt them in, and can not use any level of cohersion to MAKE the employee opt out.

wotsthat

hugheskevi wrote: »

An employer could decide to reduce salaries across the board (subject to contracts) due to higher pension payments, and as long as nothing is conditional on the member opting-out that is fine and they can tell staff why they are reducing their salary.

It is not about pretending there is free money, but about ensuring employees do not face incentives to opt-out. DWP have publicly estimated that 50% of the costs of extra pension saving will be offset by employers through things such as reduced pay awards in future (source here).

I wouldn't like to be the Finance Director trying to argue this wasn't providing a disincentive to joining the scheme especially if stated upfront. It wouldn't be safe to even hint. The safest thing to do is keep quiet about and reduce pay rises later.

People who opt out will also get a smaller pay rise as individuals can't be penalised so they're sharing the cost without getting any contributions. If employers could be more upfront about how they were going to fund the contributions this type of opting out could be reduced.

The government don't really want employees to know the employer contribution will actually be split between employer and employee so you won't be seeing any TV ads about where to find the DWP document and they've made sure it's in the interest of the employer to keep quiet until after the event.

The honest thing to do would be to have removed the option for opting out.

Thrugelmir

kidmugsy wrote: »

I dare say the rogue employer expects to save money by avoiding having to make pension contributions without paying as much by way of pay rise. So, on average, shouldn't employees expect to do worse by avoiding the pension?

Nothing rogue about managing Company finances. Salaries and other employment costs make up the largest part of most employers costs. Employers contributions automatically rise to 2% in 2017 and 3% in 2018. The bar could be set even higher post 2018. Put this in context of sub 1% CPI and arguably it's the employers that are going to be squeezed the hardest. As at least with wage rises. There's no obligation to give one. Unless employees are on the minimum wage which creates other issues for companies looking to keep costs down.

kidmugsy

Thrugelmir wrote: »

Nothing rogue about managing Company finances.

That's neither here nor there. It is rogue to tempt or pressurise staff to opt out of pension saving.

atush

I agree with all, pension.

But i also agree what the employer is doing is illegal.

JustAnotherSaver

Sorry for the delay...

While i agree that it sounds like what her employer is doing is against the rules, i have to ask....
so? What can honestly be done?

Providing he never said it in front of other members of staff, it'll be their word against his and at the end of the day, providing they're above minimum wage then you can't make the company issue out pay rises.

I'm not defending the guy, far from it. I just don't honestly see what can be done here?

My only question really would be let's say there's 2 people, one who remains in the pension & one who opts out.

The company issue the one who opted out a pay rise but not the one who remained in.

The one who gets the pay rise is told "shhh, don't tell anyone you got that".

Providing the employee stays quiet, nobody will ever know. But if the employee tells the other members of staff then can anything be done when one is given a pay rise & the others aren't when they all essentially do the same job?


I'm sure i read a question about my wifes status at her work. There's only a small number of employees, perhaps 5. My wife is considered to be #1 really. She's currently paid the most, has the most responsibility & while doesn't have a job title above any of the others, the whole company consider her to be head of her department (hence the extra pay). Never has any days sick, never complains openly.

And yes, she is paying in to a S&S ISA at the moment & would (when it comes in) be paying in to the workplace pension.

Thrugelmir

JustAnotherSaver wrote: »

Sorry for the delay...

While i agree that it sounds like what her employer is doing is against the rules, i have to ask....
so? What can honestly be done?

Providing he never said it in front of other members of staff, it'll be their word against his and at the end of the day, providing they're above minimum wage then you can't make the company issue out pay rises.

I'm not defending the guy, far from it. I just don't honestly see what can be done here?

My only question really would be let's say there's 2 people, one who remains in the pension & one who opts out.

The company issue the one who opted out a pay rise but not the one who remained in.

The one who gets the pay rise is told "shhh, don't tell anyone you got that".

Providing the employee stays quiet, nobody will ever know. But if the employee tells the other members of staff then can anything be done when one is given a pay rise & the others aren't when they all essentially do the same job?


I'm sure i read a question about my wifes status at her work. There's only a small number of employees, perhaps 5. My wife is considered to be #1 really. She's currently paid the most, has the most responsibility & while doesn't have a job title above any of the others, the whole company consider her to be head of her department (hence the extra pay). Never has any days sick, never complains openly.

And yes, she is paying in to a S&S ISA at the moment & would (when it comes in) be paying in to the workplace pension.

What's changed? Pay (and pay rises) particularly in smaller companies has always been at the total discretion of the employer. Never been a right to anything until MW was introduced.

xylophone

Providing he never said it in front of other members of staf

Do you mean that he has called each employee to a private meeting in his office and said,

"I have to provide a pension scheme next year but if you join, you can say good bye to any chance of a pay rise from now to eternity?"

The employees know this has happened because they have discussed the employer's "offer" amongst themselves?

They could telephone TPAS for advice?