Readers will recall the “whistleblowing” employment case of Clyde & Co LLP and another v Bates van Winkelhof and the concerns that this would mean that LLPs would need to consider whether some or all of their members should be auto-enrolled.
Since the judgment, we have found that in general LLPs have taken the view that they are not caught but this is dependent on if their members are "workers" under the legislation and how their members are remunerated. If there are salaried members, this is straightforward - they are employees and are caught. If they are equity members, they are self-employed and remunerated by profit only and are not caught (profit only members). But what about members who are usually termed “fixed share”? Often they are treated more like workers and have a remuneration package that is more akin to qualifying earnings for auto-enrolment purposes despite being badged as profit sharing members and having self- employed status.
The DWP commenced a consultation in January that has just ended. The intention is to amend the existing regulations with effect from 6 April 2016 to make LLPs an exception for what it calls “genuine partners”. The problem is that this proposed amendment actually confuses the picture because it gives an exception in the form of discretion for LLP members who are not caught by the legislation in any event, ie what we have called profit only members. Unless this is addressed following the consultation, it resolves nothing and indeed will require LLPs which have previously had no issue to actively consider if they wish to apply auto-enrolment. Also, as it is not retrospective, those LLPs which have taken no action relating to their fixed share partners should closely review how they are treated and remunerated and whether they ought to have been or need to be auto-enrolled on the LLP's staging date.
If DWP's intention is to remove LLPs from the mandatory auto-enrolment requirements for all self-employed members, it is quite an interesting move since there is much debate going on relating to the self-employed pensions time bomb. There has been a steep fall in their pensions savings compared to those in employment. As of 2013/14, only 17% of the 4.6 million self-employed contributed to pensions compared to 52% of employees. The percentage of the actual contributions was also a lot lower. Only a decade earlier, 36% of the self-employed contributed.