Last week's Supreme Court decision in Clyde & Co v Bates van Winkelhof has focused attention on the employment status of partners who are members of limited liability partnerships (LLPs). This alert outlines the implications for pensions and automatic enrolment.
The Supreme Court decided that a fixed salary partner who was a member of an LLP was a 'worker' for employment law purposes. As a result, many members of LLPs (who are usually referred to as partners) may be considered workers under the Pensions Act 2008 and are potentially subject to automatic enrolment.
Any LLPs who had relied on the previous decision in the Court of Appeal and excluded their members on the grounds that they weren't workers will now have to reconsider this position.
At the heart of the issue is whether members of the LLP are workers (in line with the Supreme Court's decision) and thus subject to automatic enrolment or are genuinely self-employed (and thus not workers and exempt from automatic enrolment). While this assessment should be carried out on a case by case basis, many LLPs will be able to decide that partners perform sufficiently similar roles that they can be treated in the same way.
One of the main pitfalls for HR teams faced with automatically enrolling LLP members is fixed pension protection. LLPs should ensure their communications clearly flag this issue and emphasise that if an LLP member with fixed pension protections fails to opt out within the first month and accrues pension benefits they will lose their protections.
The Department for Work and Pensions and the Pensions Regulator have not provided guidance on this issue yet. The policy intent set out in February's 'Government response to the consultation on exceptions to the employer duties' suggests that there will be no scope for a legislative carve out or exception for LLP members.