One of the requirements of auto-enrolment is that an employer auto-enrol an employee whose earnings exceed a specified earnings “trigger”. Problem is, an employee may have a “spike” in their earnings where they earn more in one pay period than they do normally. And what would happen if an employer auto-enrolled them immediately? The employee could well choose to opt-out of pension saving due to their normally low earnings. Everyone gets involved in administrative paperwork when there's no need. So what's the answer?
Enter the postponement period. An employer can put off having to auto-enrol an employee for up to three months. So, for example, an employee's earnings “spike” for the month of August. The employer applies a postponement period that ends the last day of the following pay month (i.e. 30 September) meaning the new date for auto-enrolment becomes 1 October. But at that time the employee doesn't have earnings for October that exceed the earnings “trigger”. This means the employer does not have to enrol the employee.
But what happens when the employee's earnings next “spike”? Should they now be auto-enrolled straight away, or can the postponement period be applied once again? We now have an answer from The Pensions Regulator.
There are two types of postponement period:
1. The worker postponement period, which can apply either: once, to all existing employees on the employer's staging date, or on an employee's first day of work as a new employee.
2. The eligible jobholder* postponement period, which the employer can apply to those who become entitled to be auto-enrolled, i.e. when an employee reaches age 22, and/or their earnings exceed the “trigger” for the pay period in question.
It is the eligible jobholder postponement period that interests us where an employee's earnings “spike”. The Pensions Regulator states: “If the worker is not an eligible jobholder on expiry of the postponement period [e.g. their earnings are no longer high enough]… they will not need to be automatically enrolled. The employer must continue to monitor their status on an ongoing basis. At the point when the worker next becomes an eligible jobholder [e.g. the next time their earnings "spike"], the employer can choose to use a further eligible jobholder postponement period. This pattern can be repeated. In other words, providing the worker is not an eligible jobholder on expiry of each postponement period, another postponement period can be applied at the point when they next become an eligible jobholder.”
*For auto-enrolment purposes an “eligible jobholder” is a worker who normally works under contract in the UK, is aged between 22 and the State Pension age, and has earnings that exceed the specified earnings “trigger”.