The cost of auto-enrolment and trying to avoid it
All employers are required to enrol their staff in a pension. This obviously comes at a price, sometimes a significant one. This is particularly true for small employers, that are operating in an increasingly tough economic environment, and it may be tempting for less scrupulous employers to try and avoid this obligation. Some may just refuse to do so. Others will be more clever, perhaps trying to create company structures to avoid the obligation. It may be that they will make unauthorised deductions to wages to make up that shortfall; so, for example, they may unlawfully reduce someone’s salary or unlawfully remove benefits such as a bonus. This issue is clearly on the Pensions Regulator’s radar, as it was covered in a blog in late 2016.
Will complaining about this mean someone will have made a protected disclosure?
For a worker to receive the protection of the Employment Rights Act 1996 they must first make a qualifying disclosure (as defined in section 43B of the Act). This will occur when someone complains to an appropriate person that their employer, in their reasonable belief, has:
- Committed a crime or broken the law or is likely to do so.
- Covered up such things, or is likely to do so.
The worker also has to reasonably believe that such a disclosure is made in the public interest.
There is legislation setting out the appropriate people to complain to. This includes, in particular, the Pensions Regulator.
Given what the employer in this type of case is likely to have done, it is probable that it will have, at the very least, broken the law. There may be elements of fraud and therefore a crime. Concealment, as ever in whistleblowing cases, may also rear its ugly head. Remember that it only has to be in the employee’s reasonable belief; there is no requirement to actually prove an illegal action, crime or cover up. Given the importance of the auto-enrolment scheme nationally and the potential problems if it is widely avoided, it is likely that Employment Tribunals will be receptive to arguments that the disclosure was made in the public interest, particularly given the relaxed interpretation of that phrase by the appeal court in the recent Chesterton case.
In short, complaining about any serious deficiencies in relation to an employer’s implementation of auto-enrolment will probably make someone a whistleblower as long as they complain in the right way to the right person. Therefore this is a category of claim that will probably see significant growth in the months and years to come.
Some things to think about
If you have an employee client, they no longer have to worry about paying a tribunal fee. It is also always important to think carefully about how they make the disclosure and to whom for both legal and tactical reasons.
The employee may decide not to report it to their employer, but rather to an outside prescribed body or even the press or an MP. This may be because of an understandable fear of a backlash and wanting independent protection or because of the gravity of the allegation. However, the legislation puts many additional conditions on disclosures that are made to someone other than the employer or the employee’s legal adviser. The impact of going public can also have unpredictable consequences, which may harm the employee’s case. For example, the employer may be less willing to settle the claim.
For an employer, aside from the monetary considerations, publicity will always be a key issue. It would also be prudent to advise ongoing clients of this risk area and reminding them of the problems they may encounter if they do not comply with auto-enrolment or if their staff perceive this to be the case.