Robin Hames reveals the impact mergers and acquisitions can have on auto-enrolment implementation

While the global downturn has undoubtedly had a major impact on M&A activity over the last few years, the market for corporate action is not dormant and remains a prominent feature in several sectors such as technology, media and, indeed, financial services.

The automatic enrolment legislation does not directly address mergers and acquisitions. Some interpretation is therefore required to establish what the right practice is when takeovers take place and workers move between employers. This raises particular challenges in relation to staging dates and communications with the affected workforce.

Staging dates
The Pensions Regulator has indicated its views on this issue and it is important that employers and trustees in this scenario understand the impact of this in their planning.

Every employer employing workers on or after April 2012 will have a
staging date determined by the size of its PAYE scheme based on the latest information that was available to The Pensions Regulator on 1 April 2012.

If it wishes to do so, an employer can bring forward its staging date for early automatic enrolment and this facility can be used to harmonise the staging dates in a group.

However for administrative reasons some groups may still prefer to stagger their dates.

Accordingly, where a takeover or acquisition occurs the different employers will often have different staging dates. The question arises as to which dates should be used. The legislation does not operate at the level of a financial ‘group’ of companies but only at the employer level.

It is therefore essential to determine who the future employer will actually be as each employer’s staging date is already set.

There may be a variety of outcomes following a corporate action. Workers may be moved to a single employer entity, new or established, or the business owner may retain the use of several employers with only limited numbers of workers switching between them.

If different employers continue in the merged group then, unless the staging dates of the later employers are brought forward, the employer duties will apply at different times to the different workforces. Where a new entity is created as a result of a takeover, the new entity will be treated as a new employer and allocated a staging date.

Therefore moving a worker between employers can change their enrolment date.

Where the new employer’s staging date has already passed and workers are transferred to it, immediate action will be required to comply with the employer duties.

In some cases a worker may transfer from an employer already past its staging date to another that has yet to reach its date. The new employer will not be subject to the duties until this later staging date. However, for employees already automatically enrolled in a qualifying scheme, the new employer will still have to consider maintaining pension provision in compliance with the TUPE legislation and, where it applies, the occupational pension protection provisions of the Pensions Act 2004.

Where both employers have passed their staging date, switching workers between employers will result in more work. The new employer will have to treat the transferred-in workers as new workers notwithstanding that they are still part of the same overall group. Existing members will have to receive set information that includes confirmation that they are in a qualifying scheme. For non-members the full employer duties process (including notifications and, where applicable, full automatic enrolment) will apply.

In conclusion there are essentially two fundamental points:
• Businesses planning restructuring
involving workers changing employer
must take into account the effects
of different staging dates on their
benefits policies, administration
processes and staff communications.
• Scheme trustees that have multiple
sponsors or whose sponsors are
subject to merger and acquisition
activity should raise with the
sponsors their strategy on automatic
enrolment and whether any revisions
will be necessary to scheme rules
and membership literature.

Written by Robin Hames, head of technical, marketing and research at Bluefin Corporate Consulting

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