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Employers urged to prepare for new pension rules

Agricultural employers are being advised to use the October wage review to ease employees into new pension scheme.


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Auto-enrolment means all agricultural employers must now contribute to a pension scheme
Auto-enrolment means all agricultural employers must now contribute to a pension scheme

Many employers will be undertaking wage reviews to take effect from October 1, 2015.

 

While in the past employers could base their reviews around recommendations from the Agricultural Wages Review Board (AWB), this board was dissolved in England and Wales two years ago.

 

Now, due to new laws on workplace pensions, Strutt and Parker is recommending agricultural employers apply a 2 per cent pay rise to each employee, of which 1 per cent is given as a wage increase, and 1 per cent is paid as the first stage of the new auto-enrolment pension scheme.

 

This recommendation takes into account the National Minimum Wage (NMW) rise of 3.1 per cent to £6.70/hour from October 1, 2015, which is greater than the Consumer Price Index and the Retail Price Index, as well as the move towards a National Living Wage of £7.20 which will come into force from April 1, 2016.

 

Auto-enrolment means rather than having to actively choose to join a pension scheme, workers are entered into the scheme by their employer as a matter of course, encouraging all employees to save for a pension.

 

It is suggested that any extra payment employers might want to reward on an individual basis can be made through a discretionary bonus paid out at the end of the year.

 

But with the current state of the farming industry, experts are asking employers to be ’mindful’ of their employees situations when implementing the auto-enrolment scheme, with the dairy slump and arable commodity prices causing farmers to do little more than break even, even for the most efficient operators.

 

Auto-enrolement is effectively another form of expenditure to farm employers in the short term, which will be of benefit in the long term.

 

Strutt and Parker partner George Chichester said over the past few years, increases for farm workers have generally exceeded those in other sectors because they were rising from a low base.

 

He added: “Gradually they have been catching up with other sectors – especially when perks such as the usual provision of no- or low-cost accommodation are taken into account. There must come a time when the rate of increase should slow, to mirror that in other sectors.”

 

“One must be mindful of the impending arrival of auto-enrolment, which will add to employers costs and is effectively an additional form of remuneration to the employee as the ultimate beneficiary.

 

“One must be also be mindful of the current state of the farming sector. The crisis in the dairy sector is very evident from press reports – with employers in that sector struggling to make ends meet and not in a position to pay any increases in overhead costs.

 

“Arable commodity prices are also little better than break-even, even for the most efficient operators.”

 

 


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