EMPLOYERS can’t duck auto-enrolment just because staff are working out of the country, writes Louisa Knox
A Landmark case from the English High Court has provided useful guidance on how peripatetic workers – who travel from place to place as part of their work – should be treated for the purposes of pension scheme automatic enrolment.
The auto-enrolment regime requires that workers who work or ‘ordinarily work’ in Great Britain and who meet other age and earnings criteria, must be automatically enrolled into a qualifying pension scheme and receive the benefit of an employer contribution.
What constitutes ‘ordinarily working’ has not always been clear for some groups of workers, especially those with an overseas dimension to their employment. In the recent case of Fleet Marine Services (Bermuda) Limited v the Pensions Regulator, the regulator issued a compliance notice to the employer concerning different groups of workers with unusual working patterns setting out that, in its view, these arrangements did meet the ‘ordinarily working’ test.
The workers concerned were cruise ship workers who were resident in the UK, but who, while working on their employer’s cruise ships, did so outside UK territorial waters.
The Pension Regulator’s broad position was that crew members living in the UK were ‘ordinarily working’ in Great Britain if their tour of duty began and ended in there, with the consequence that they would be brought within scope for automatic enrolment. This followed guidance from the Regulator when automatic enrolment was introduced, explaining that in cases where it is not clear that a person ‘ordinarily works’ in Great Britain, where the member is based will be the key general determinant of assessing whether a worker is ordinarily working.
The employer – an overseas subsidiary of a UK company – did not accept the Regulator’s view and sought a judicial review of the Regulator’s decision in the courts. The court concluded:
‘The correct test for establishing whether a worker is ordinarily working in Great Britain for automatic enrolment purposes is the worker’s ‘base’;
‘Crew members who reside in Great Britain and who routinely begin and end tour of duty trips from a British port should be viewed as being based in Great Britain (even though they may spend most of their working time in non-UK waters), with their employer therefore subject to automatic enrolment obligations;
‘By contrast, crew members who reside in Great Britain but who routinely begin and end tour of duty trips from a non-British base should not be viewed as being based in Great Britain (even though they may be paid to travel to the foreign port), with their employer not therefore subject to the automatic enrolment obligations in relation to them
‘The tests are assessed on the basis of fact and not only on the wording of the employee contract (though the latter will still be an important consideration)’.
The conclusions were made by the court notwithstanding the employer’s lack of connection with the UK. The employer was an overseas subsidiary of a UK company, with no place of business itself in the UK. Its administration and payroll was performed outside the UK, with most of its ships registered overseas.
Although the facts applying in Fleet Marine are quite specific to this particular case (including consideration of specific employment contracts), employers with peripatetic workers should nevertheless consider reviewing their automatic enrolment arrangements in the light of the general guidance given from the court on where their workers are based, to establish that there are no compliance breaches.
At a basic level, the case gives general guidance on the degree of connection to Great Britain a person requires in order to establish that they are ordinarily working there.
The case emphasises more widely that for internationally mobile employees, the fact that their base may bring them into scope for being automatically enrolled under the UK pensions regime, this may not dovetail with other aspects of their employment. For example the existence of a worker’s base in the UK for automatic enrolment purposes does not necessarily tie in with: the residency rules for being subject to UK tax as employees, and
the habitual residence rules governing the issuing of personal pension contracts (for example as part of a group personal pension scheme) by insurers.
Inconsistencies in these areas go to show that there are a range of wide issues to consider for employers of workers with an international dimension to their employment.
• Louisa Knox is a Partner with Shepherd and Wedderburn