Business clinic: Updating employment contracts

Most SMEs, whether they like it or not, accept that auto enrolment will soon hit them and be a further financial responsibility they must bear.

By Emma Swan, Taylors Solicitors.

And they’re also aware of the need to speak to a pension provider and put in place the most appropriate scheme for their auto enrolment obligations.

What most SMEs remain unaware of though are the employment law and HR implications of changing existing pension provisions for employees already in a company pension scheme.

It may be the case that it is necessary to change contracts of employment, which may require consultation under either trade union legislation for collective variation of terms and conditions of employment or under pension law for listed changes.

Whether the two key laws apply will depend on the changes you plan to make and the number of employees affected by the changes. But beware - there are different minimum numbers of employees triggering each law and different periods of time for the consultation exercises.

The risks of not following the consultation laws are high; penalties under trade union laws can amount to as much as 13 weeks’ gross pay for each affected employee, and under pension law, fines from the Pension Regulator of up to £50,000 and other sanctions can apply. At Taylors we have been working closely with clients and pension experts since 2012, when pension auto enrolment first came into force, to ensure that, as well as employers setting up the right pension scheme, they are also following the correct procedures in consulting with employees and changing contracts of employment in compliance with the law.