Consultation requirements on auto-enrolment
Employers are now aware of their obligations to ensure that their eligible staff will be enrolled in a compliant pension scheme from the auto-enrolment staging date set by the government.
One point that has been often overlooked is whether employers have the duty to consult with their employees regarding the changes to their pension arrangements.
For an employer with 50 employees or more there is an obligation to consult with affected employees where they are proposing to, for example, reduce their level of contributions and/or increase the member contributions. Consultation will cover all current members of the scheme and also any employees that are eligible to join the scheme which have not yet taken up the opportunity to participate.
At the outset, the timetable for the consultation process should be explained including the dates for submitting written comments and so on. In any event, the consultation process must last at least 60 days.
When consulting the employer and the affected members and their representatives are under a duty to work in a spirit of cooperation taking into account the interests of both parties. The DWP guidance states that the consultation should include an exchange of views and the establishment of a dialogue between the employer and people it consults. It does not, however, mean that the employer must reach an agreement with those it is consulting with over the proposed changes. The legal duty is simply for the employer to consider the response it receives before deciding whether to go ahead with the change.
If an employer does not properly consult with their employees they risk a fine of £50,000 from the Pensions Regulator. It is therefore important that it is not overlooked, if there are going to be changes to entitlements, in all the administrative burden of getting ready for your staging date.