As part of your auto enrolment duties, you have a legal obligation to put all eligible employees into your workplace pension scheme. However, you can delay your duties in certain circumstances – this is known as postponement.
At the Federation of Small Business, we asked our payroll and pensions experts your frequently asked questions about how this works and what you need to do.
What is a postponement period?
Postponement is where you delay the process of assessing an employee for auto enrolment to your pension scheme for a maximum of three months. You can choose to use the full three months, or just a few days or weeks.
It doesn’t affect your duties start date or declaration of compliance deadline.
Why would you use postponement?
Seasonal staff
If you’re only hiring someone on a temporary contract for a couple of months, for example during the summer season, then you can choose to postpone this process. In this case, their assessment date may be after they have finished employment, meaning you wouldn’t need to auto enrol them unless they’re eligible or request to opt-in.
Probationary periods
Another common use is during a new employee’s probationary period before they start permanently. Your trial period may be longer than three months, so keep this in mind when using postponement, as you can only delay for three months.
Flexibility
You might also need more time to set up a compliant workplace pension scheme for your business, especially if you’re employing for the first time. Postponement can give you flexibility on when you complete the assessment, for example by delaying the assessment until next month.
You might also find it easier to line up your contributions with pay periods. If someone requests to opt-in, you will need to start contributions from the next pay date.
When can you postpone auto enrolment?
There are only a few scenarios where postponement can be used from.
- Your staging date/duties start date
- A staff member’s first day of employment
- The date a staff member first meets the age and earnings criteria to be put into a pension scheme
Can you use postponement at re-enrolment?
No, you can only use it before auto enrolment. Every three years you must assess your staff and re-enrol them into a pension scheme if they’re eligible, and complete a re-declaration of compliance to show you’ve met your ongoing duties.
How to write a postponement letter
You’re legally required to write to each member of staff to inform them about postponing their pension. This is known as a postponement notice.
Your letter should:
- explain that you’ve delayed putting them into a pension
- explain how auto enrolment applies to them
- include the date of their assessment
- let employees know that they have a right to opt-in before the end of their postponement period
- be sent within six weeks of the start of the postponement
You don’t need to tell The Pensions Regulator or your pension provider that you’ve decided to do this.
FSB members can download a customisable template letter on the FSB Legal and Business Hub.
Can an employee opt-in during postponement period?
Yes. If your employee writes to you during the postponement period requesting that they want to join your workplace pension scheme, you must put them into your scheme. This is their legal right and you may need to make contributions if they’re aged 16 – 74 and earn at least £520 a month or £120 a week.
My employee has become eligible during the postponement period, do I need to put them into my pension scheme?
No. During the postponement period, you won’t need to assess your employee. If their earnings vary during this period, this won’t affect the postponement period unless the employee requests to opt-in.
Will I have to pay backdated contributions for the postponement period?
No, if you follow the postponement process correctly, you won’t need to start paying contributions until eligible employees are auto enrolled into your pension scheme at the end of the postponement period (or unless an employee requests to opt-in). If you miss your duties start date without a compliant postponement then you may have to.
If you’re concerned about compliance, FSB members can get in touch with our friendly team at FSB Payroll and Pensions to learn more about our rescue service.
What do you need to do at the end of the postponement period?
Your deferral date is the last day of the postponement period. At this point you’ll need to:
- Assess the employee(s) to see if they’re eligible
- Place any eligible employees into a pension scheme and start paying into it
Can you apply for a second postponement period?
No, you can only apply for postponement once for each staff member if they’re eligible for a pension scheme, even if you don’t delay for the entire three months.
However, if they aren't eligible after the initial postponement period they are not enrolled, so if the following month they become eligible, postponement can be applied again.