UK - New draft regulations on fixed term workers will push up pension scheme costs and add to administrative burdens, according to the Confederation for British Industry (CBI).
The CBI has lobbied for the exclusion of pensions from the regulations which were published by the Department for Trade and Industry (DTI) on Monday. The regulations are due to take effect from July.
CBI senior policy adviser for employer resourcing Anthony Thompson said that under the new regulations, employers will have to provide exactly equal treatment on pensions for a fixed term employee who leaves before two years as it does for permanent employees.
Thompson added: “The employer will have to pay in his or her contributions, but will also incur administrative charges as well as the administrative burden. At the end of the day the fixed term worker will not have received any benefit, because they will just receive their contributions back.”
He also pointed out that most fixed term workers would prefer to have another benefit in lieu of a pension - possibly an increased salary package. “In that situation the danger is that you are treating fixed term workers in a more favourable manner than permanent employees.”
Hammond Suddards Edge lawyer Francois Barker said employers were now faced with three impractical options. Firstly, to admit fixed term workers to their pension scheme, even if the worker’s contract is less than the vesting period.
The second option would be to provide them with access to a stakeholder, and risk claims that this does not treat them comparably with permanent employees as required by the regulations. The final option would be to exclude them and compensate them in other ways.
Barkers said: “Faced with the draft regulations as they stand, most employers still admitting new employees to occupational schemes will probably simply look to increase the waiting period applicable to any employee wanting to join. They would thus be able to comply with the regulations only by treating fixed term and permanent employees equally poorly.”
He also lamented that the DTI had not clearly defined the objective justification clause in the regulations, making it easier to exclude fixed term workers from individual elements of the package enjoyed by his comparable permanent employee.
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