Hello and Welcome,
In our February newsletter, we would like to tell you about the GDPR regulations, Intelligent Money changes and the salary exchange scheme.
GDPR, or to give it is full name General Data Protection Regulation, is going to hit a largely unsuspecting UK business community on the 25th May 2018. Although this is as yet just another piece of EU regulation, it will apply to all businesses that process data from that date. It is likely that these new regulations will continue to apply after BREXIT too.
Consent is the cornerstone of this legislation. According to the European Data Protection Directive, consent must be “unambiguous”, “specific, “informed” and “freely given”. These new requirements will impact not only on us as a company processing sensitive data on behalf of our clients, but will also fall on you both in your capacity as an employer and your own client relationships.
As an employer for example, if you process sensitive records on behalf of your employees, you will need their consent. It is common practice under the current Data Protection Rules to include general clauses on data protection in employee’s contracts of employment. The issue here is that blanket consents of this nature are unlikely to satisfy the need to ensure that consent must be clearly given in plain language and must be distinguishable from other matters.
Dealing with this matter in an employment contract mixed with other matters could be a potential problem and probably would not satisfy the condition of being “freely given.” This is because your employees could feel that they are required to sign the contract as a condition of employment.
We would strongly advise you speak to your HR adviser in order to begin the process.
Don’t leave this until the last minute as penalties for noncompliance are breath-taking!
Many of our clients use Intelligent Money as the provider of the Qualifying Workplace Pension Scheme. Those will be very interested to know about the new functionality that allows online access to pension pots for IM members.
Employees logging into their AutoEnrollMe employee portals will see a link that will allow them to log in and view their individual pensions. If you would like to activate this functionality, please speak to either your adviser or support team.
The AutoEnrollMe Employee portal also carries full details of all employer and employee contributions. This will easily allow employees to reconcile contributions deducted via payroll regardless of which Pension Provider is used.
Activating Employee Portals is simple! You need to update your payroll system with your employees’ email addresses. If you would like to activate employee portals, please don’t hesitate to contact your support team.
Salary Exchange and the new Auto Enrolment contributions
Following our last newsletter, we have had considerable interest regarding the new contribution rates applying from April 2018.
Employees will not be able to opt out of the new contribution rates, unless they are a new joiner in April. For the majority of the workforce, there are two options: to stay in the employer’s scheme to ensure they continue to benefit from combined employer and employee contributions towards their retirement, or cease payments losing this valuable benefit.
Some employers are considering a salary exchange as a way of reducing the impact of the rising contribution rates on staff. Salary sacrifice or salary exchange as it is also known, allows employees to reduce the impact of the new contribution rates by agreeing to accept a salary reduction for the value of the contribution. In other words, the employee agrees to make the sacrifice of income which the employer pays into the pension scheme increasing the employer contribution.
Both employee and employer are affected by this arrangement, in that National Insurance Contributions (NICs) are reduced. As an employer, you can agree to give up this NIC saving to the employee’s pension as an additional benefit, but this is discretionary, and you are not forced to do this.
Before implementing any changes, as an employer, you should give an overview of how individual employees could be affected by them. Employees can ask for an illustration of how this arrangement would impact their ‘take-home pay.’ In most cases, the take-home pay should be higher. The contract of employment will have to be updated accordingly.
Employees being offered salary exchange should take the advice to decide if it is right for them. There may be some disadvantages since the effect of a salary reduction could reduce for example mortgage offers, if worked out on a multiple of salary, and also may affect other benefits such as a death in service schemes, when based on a multiple of income.
Lower earners cannot benefit from salary sacrifice if it takes their income below the minimum wage.
And finally, to those of you who have expressed an interest in supporting Wendy in her charitable cycle ride from Lands’ End to John O’Groats for Sarcoma Cancer – a big thank you – we will publish a funding link in our next newsletter!
From Russell, Wendy, and all of us at AutoenrollMe.