The short answer is generally no, let’s find out more…
Why Postponement?
There are many reasons why an employer might choose to use postponement:
- Avoid pro-rata [called ‘part-period’] calculations by aligning automatic enrolment with the usual pay period dates
- Seasonal workers who may typically be employed for less than 3 months
- Workers who may occasionally have a spike in earnings
However, the rules are complicated and not well understood!
Postponement Options
There are essentially two postponement options in the Pension Regulators detailed guidance:
16. The deferral date is a date of the employer’s choosing up to three months and a day from:
- the first day of employment, if they are choosing to use postponement on the first day of employment in respect of any worker
- the date the criteria to be an eligible jobholder are met, if they are choosing to use postponement on the day a worker employed by them meets the criteria to be an eligible jobholder on or after the employer’s duties start date
It is crucial to understand both options, which involve issuing the appropriate notices at the correct times.
Example
Assume an employee starts on June 10th, and their full month earnings are above the trigger. Also, assume a typical monthly Pay Reference Period (PRP) of 1st to last day of the month. Let’s look at the 2 options for postponement:
If you choose to defer from the start date, the postponement date must be before September 10th. It cannot be more than three months from the start date. It cannot be moved to October. Many payroll professionals incorrectly assume that a mid-month assessment date can be moved to the next whole month. The maximum period is three months, and if you wish to align the postponement to a whole pay reference period, you’ll need to select a period that is less than three months. In the case above, that would be postponing to July 1st, August 1st, or September 1st.
If you choose to postpone from the first day they become an eligible jobholder, other factors come into play, for example, if the pro-rata month-one earnings would exceed the trigger.
- If their pro-rata earnings in June do exceed the trigger, they will need to be enrolled on their start date of June 10th.
- The only case that may allow for a more extended period is if the pro-rata earnings in the first month are below the earnings trigger. The employer would then not choose postponement at the start date, but assess immediately. Because earnings in month 1 would be below the trigger, they would have to issue the appropriate notice and then wait for the earnings to rise above the trigger. Assuming this was July 1st, then the postponement of 3 months after the worker becomes eligible would be 1st October.
Summary
Generally, the maximum time for postponement is three months. That means a worker starting on June 10th must be enrolled on September 10th and included in the September pay run. The only exception to this case is if the first month’s pro-rata earnings fall below the trigger, and postponement is used from the date they become eligible, and the correct notices are provided. In this scenario, they will only become eligible on July 1st, and then it would be possible to postpone for 3 months and enrol them on October 1st.
References
The Pension Regulator Postponement: An explanation of how to apply postponement