The Supreme Court has ruled that members of Limited Liability Partnerships (LLPs) can be considered workers for auto-enrolment (AE) purposes, The Pensions Regulator (TPR) has confirmed.
The judgement in Clyde & Co v Bates van Winkelhof found partners receiving fixed salaries were workers in reference to employment law.
Subsequently, LLPs may be required to review their AE arrangements to ensure partners are assessed in line with AE duties.
The facts of the case involved allegations of whistleblowing; with the pre-hearing establishing that Winkelhof, a partner of Clyde & Co, who was expelled from the partnership in 2011, was considered a worker under the Employment Rights Act 1996.
However, the Supreme Court overturned a decision in the Court of Appeal to find Winkelhof was a worker when her position at the firm was terminated, as she was providing services directly to Clyde & Co. The law firm could not be considered a client and Winkelhof was unable to market her services as a solicitor outside of the company, meaning she could not be considered self-employed, the court ruled.
TPR issued a response to the Supreme Court’s ruling, explaining that LLPs should “assume that the Supreme Court’s decision is equally applicable to the Pensions Act 2008 for automatic enrolment purposes”.
The TPR’s guidance also intimated that AE could include the backdating of contributions – something which Clare Abrahams, head of auto-enrolment at Lorica, believes is a “significant development” for partnerships and would affect many clients.
“The fact that any enrolment has to take place, on top of the fact that it should be backdated, will result in administration effort and costs that were not previously anticipated,” she said.
“However, an even greater concern is that some individuals’ protected tax status may be under threat.
“It was one thing to opt-out under the normal process after accruing one months’ pension contribution and HMRC were geared up to accept this, but many feel that HMRC will not have been expecting opt-out to span a much longer contribution period.
“There are valid concerns that an unintended consequence of this ruling may mean individuals losing their protection as a result of the way in which rectifying this might be managed.
“We would urge employers to consider carefully how best to respond to the issue.”
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