Bosses could face legal action over auto-enrolment

Bosses could face legal action over auto-enrolment

Employers are at risk of legal action from their workers due to auto-enrolment policies because the legislation excludes certain groups of people, which could mean claims of indirect discrimination under the Equality Act.

Financial services company Defaqto is raising awareness of this situation, with experts agreeing there are grounds for legal action.

Introduced in 2010, the Equality Act legally protects people from discrimination in the workplace and in wider society, and covers areas such as gender, age and health.

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The current thresholds for auto-enrolment, introduced in 2012, mean only workers older than 22 and earning above £10,000 have to be automatically enroled into a defined contribution (DC) scheme by their employers.

Agnes Fletcher, an independent expert on equality, and former independent reviewer of the Disability Committee of the Equality and Human Rights Commission, told FTAdviser that “if people have been treated less favourably than others, on grounds of various issues, they could have a claim for illegal discrimination against their employer or pension provider” due to auto-enrolment".

She added: “Large pension providers, big employers, big organisations, they have been on this issue for many many years.

“But there is a whole new round of business owners for whom the provision of a pension hasn't been a top priority for them, so it is their responsibility, the legal duty lies with them to ensure that whatever scheme they introduce has no bias towards their employees.”

According to Defaqto, which published recently a guide on auto-enrolment for advisers with Aviva, there are four areas where auto-enrolment can breach the Equality Act, with the main ones being salary and age.

It is possible employees working in part-time and low-paid roles might consider that they have been indirectly discriminated against if they are not enrolled into their employer’s workplace pension scheme on the same terms as other employees.

Richard Hulbert, insight analyst for wealth at Defaqto, said that according to data from the Office for National Statistics (ONS), employees in these positions will be disproportionately female and/or disabled.

Indirect discrimination can also be claimed by the higher paid, since employers only have to consider salaries up to £45,000 to calculate their pension contributions.

Mr Hulbert said: “Someone on a £45,000 salary and someone on £50,000 will receive the same payment into their pension scheme, but what that means is that from a percentage perspective, the person on the highest salary gets a lower percentage going into his pension.”

On age, employers only have to enrol those between 22 years old and state pension age.

Defaqto said: “If two employees are doing the same job, it seems appropriate to pay them the same remuneration”.

Mr Hulbert argued: “It would only take one or two of those [workers] to get together, and then we get a class action of indirect discrimination against their employer.”

The safest way of making sure that the Equality Act isn’t breached is for employers to enrol all their workers in a DC scheme, independently of age or salary, he added.