Due to the employer-employee relationship between an umbrella company and the worker, it is a legal requirement for umbrella companies to enrol their employees into what is called a workplace pension.
In other words, when a worker joins an umbrella company, they become an employee of that umbrella company and thus workplace pension comes into effect and also becomes a legal requirement.
A workplace pension is a way of saving money for the worker’s retirement in a tax efficient manner. The onus of which falls on the employer. In such cases, on the umbrella company.
How does it work?
You are automatically enrolled into the workplace pension scheme by your umbrella company, and a certain percentage of your pay is deducted and put into the pension scheme automatically on every payday.
Your employer must enrol you automatically in the workplace pension scheme if you meet the following criteria:
There are certain exceptions though where your employer doesn’t have enrol you.
When is an umbrella company not required to enrol you in the workplace pension scheme.
Your employer need not enrol you in a workplace pension scheme if you earn less than £520 a month, £120 a week or £480 over 4 weeks.
Which pension service provider do the umbrella companies use?
Most umbrella companies would have their preferred pension service provider and they would auto-enrol you in the pension scheme when you register with them. Usually, umbrella company employees are enrolled into Nest Pensions, which is the workplace pension scheme set up by the government.
What is the timeframe for the workplace pension scheme enrolment?
Umbrella companies are required to enrol their employees into the workplace pension scheme within 3 months (12 weeks). This time period sometimes works in favour of umbrella companies, especially in the case of short-term assignments.
For workers on short-term assignments, i.e., less than 12 weeks, umbrella companies would sometimes delay the worker’s enrolment till the time the worker's assignment is over. Since the worker's assignment finishes before twelve weeks, the umbrella company does not enrol the worker in the workplace pension scheme.
How difficult it is to enrol in the workplace pension scheme?
It’s very easy for the umbrella company to enrol their employee in the workplace pension scheme. Upon enrolment, the umbrella company notifies their employee about the pension scheme. No action is required from the worker’s end, except in the case where the employee wants to opt-out.
Can I go with my preferred pension provider?
Should you want to go with your preferred pension provider, you need to contact your pension provider. Most umbrella companies have a 30 day opt-out period, and you can easily get a refund of your first contribution. Please note that you cannot opt-out of a workplace pension until your first contribution. This is a government regulation.
Which details will I get from my umbrella company about the workplace pension scheme?
Your employer i.e., umbrella company will provide you with the following details once they have enrolled you into a workplace pension scheme:
How much is the pension contributon and can I contribute more?
The payslip would clearly mention the contributions, which is typically 5% as employee’s contribution and 3% as employer’s contributions. A worker can contribute more from their earnings towards pensions in a tax efficient manner, through salary sacrifice. It may not be for everybody, but it’s a great way of saving money for retirement. Talk to an umbrella company expert to find out more about salary sacrifice.
What your umbrella company (employer) cannot do?
They cannot encourage or force you to opt out of the pension scheme, or unfairly dismiss or discriminate against you for being in a workplace pension scheme.
Disclaimer
This article is for information purposes only. We strongly recommend taking professional advice or an expert opinion before reaching any conclusion. We have a team of experts who can help you with your queries, please feel free to review them. You can also write us an email at [email protected].