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Do you have to pay your nanny a pension? Pensions auto-enrolment for small employers

If you employ at least one member of staff and pay them via payroll (even if they are family), you will be affected by the pensions auto-enrolment rules introduced by the coalition government, which require all employers to provide and contribute into a pension for their staff. The obligation for small employers (those with between 1 and 49 staff) is being phased in over the next two years, starting next month. You can find out your “staging date” (the deadline for enrolling your staff into a pension) by entering your PAYE reference into the Pensions Regulator website. If you do not pay your staff through a PAYE scheme, your staging date will be 1 April 2017. You should also receive a letter from the Pensions Regulator (if you have not already) setting out your new duties, which include a duty to provide certain information to your staff.

Staff must meet certain criteria to qualify for auto-enrolment, as follow:

1. work in the UK under a contract of employment or a contract to perform services personally;

2. be aged between 22 and the state pension age; and

3. earn above £10,000 a year (the “earnings trigger”).

Members of staff earning less than the earnings trigger have a right to join a pension scheme but do not need to be automatically enrolled. If staff are paid through an agency, then the agency will be responsible for auto-enrolment and making pension contributions. If staff are found using an agency but subsequently paid directly by the employer, the employer will be responsible for pensions auto-enrolment.

So, if you have a nanny (or other staff, such as a cleaner or gardener) and pay them more than £10,000 a year (or £833 a month), you will need to enrol them into a pension on or before your staging date. Pensions auto-enrolment does not apply to staff that are self-employed, ie who pay their own taxes. Therefore, if you have a cleaner and pay them in cash for, say, three hours a week, you will not need to enrol them into a pension.

If you are affected by pensions auto-enrolment, you may want to prepare for your staging date now. It may be helpful to start working out which staff will be eligible, how much it is going to cost you, check that your payroll processes are ready and choose a pension scheme to enrol your staff into. NEST, a pension provider set up by the government, is an option as it is available to anyone.

If you engage staff to help with cleaning, childcare or gardening, you may not automatically consider yourself to be an employer. However, you would be ill-advised to ignore the new rules, as you may find yourself facing a range of potential penalties, including compliance notices, fines and even criminal sanctions.

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