Frequently Asked Questions
(Based on Draft Regulations)
How is the rate
calculated for term-time employees?
How are term-time
employees who get retainer fees treated when assessing which contribution band
they fall into?
How is full-time equivalent pay calculated for part-time lecturers?Are Saturday
enhancements included at the actual rate and not brought up to FTE?Is it discriminatory that additional hours worked
by part-timers would not be pensionable?
If cost of living
increases are only advised in October, how should they be dealt with?
What if someone starts
acting up part way through the year? After how
long does acting up affect the contribution rate?
If someone is on
maternity leave, how is their contribution rate calculated?
Most schools revise
contracts and make new appointments in September – what happens if the pay
increase here affects the band they go into?
How will employers
notify NILGOSC of individual contribution rates?How do I inform
employees of their contribution rate?
What is the procedure
for the right of appeal to the County Court?
Will the contribution bands change before they come
in on 1 April 2009?
If you are retired on
grounds of ill-health in the lowest tier, are you obliged to look for work?
If you are reviewed by
the Committee in tier 3 and are subsequently moved up to tier 2, is the tier 2 ill-health
backdated?
What if a person who
leaves under Tier 2 later becomes a Tier 1?
What do we do with a
person who works casual part of the year and on a rota basis for the remainder,
e.g. seasonal guides?
What happens if an
employee has a 2 month contract and can’t be brought in? Or a person joins
employment on a temporary contract, for example those covering sick leave who end
up staying for more than three months? Will membership be
backdated if their contract is extended and they then meet entry criteria?
Will resources be made
available to help employing authorities when contacting those who previously
opted out and for the new scheme
changes?
Under TUPE arrangements,
a number of staff from Education and Library Boards will join the NI Library
Authority on 1st April 2009. As the pay rate is based on earnings at
31st March 2009, is it the responsibility of the ELBs to inform the
staff of their rate before they transfer? Does the ELB also have
the responsibility of contacting previous opt outs?Who would the new NILA
staff appeal to if they weren’t happy about the rate they were on?
Contribution Banding
Term-time Employees
How is the rate
calculated for term-time employees?
Pay for term-time workers is NOT increased to a 52 week equivalent to
determine band. The band should be determined by actual whole-time pay for the number of weeks worked.
A “family friendly” pattern, where an employee works 11 months out of 12,
is treated as part-time, not term-time and therefore should be grossed up to a
12 month equivalent.
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How are term-time
employees who get retainer fees treated when assessing which contribution band
they fall into?
Retainer
fees should be included when assessing total salary for contribution rates. For
part-time workers, the retainer fees should be adjusted as necessary.
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Part-time Employees
How is full-time equivalent pay calculated for part-time lecturers?
Part-time
lecturers should
have their rate calculated by multiplying their hourly rate by the
full-time equivalent working hours per week and weeks per year.
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Are Saturday
enhancements included at the actual rate and not brought up to FTE?
Ad hoc pensionable allowances such as standby, Saturday enhancement and
sleep-in payments should be included at the actual rate and not the FTE.
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Are part-time bands being based on a full-time
equivalent pay discriminatory?
The regulations have been
equality assessed and below is a detailed explanation and example of why it is
not discriminatory to base part-time rates on full-time equivalent.
An example is an employer who has two people on
the same scale point, one who is half-time and earning £10,000 and the other is
full-time and earning £20,000. Both are receiving the same hourly pay
rate.
Using the whole-time equivalent pay to assess
the contribution rate for both would result in a contribution rate of 6.5%.
Therefore for one year in the scheme the full-timer
would pay £20,000 x 6.5% = £1,300 and get a benefit of 1/60th x 1 x
£20,000 = £333.33
For one year in the scheme the part-timer would
pay £10,000 x 6.5% = £650 and get a benefit of 1/60th x 0.5 x
£20,000 = £166.67
So the half-timer would pay exactly half the
contributions and get exactly half the pension of a full-timer.
If the contribution rate had been based on
actual pay, rather than the whole time equivalent pay, the full-timer would
have paid 6.5% and the half-timer would have paid 5.5%.
Therefore for one year in the scheme the
full-timer would have paid £20,000 x 6.5% = £1,300 and got a benefit of 1/60th
x 1 x £20,000 = £333.33
The half-timer would have paid £10,000 x 5.5% =
£550 and got a benefit of 1/60th x 0.5 x £20,000 = £166.67
Clearly this would not have been equitable as
the half-timer would have paid much less than half the contributions of the
full-timer but would get a benefit of exactly half that of a full-timer.
Also as the Department took the view that the pro-ration principle in the
Part-time Workers (Prevention of Less Favourable Treatment) Regulations applies
to deductions as well as hourly pay rates, the decision was taken to base the
contribution rate of a part-time employee on their whole-time pay.
However, you may feel that the method of
calculation disadvantages some part-time employees who pay more for their
benefit than a full-time employee. For example if Employee A earns
£12,000 and works full-time for 10 years then a pension equal to 10/60th
of £12,000 (£2,000) will be payable and the contribution rate due is 5.5%
(total contributions paid are 10 x 12,000 x 5.5% = £6,600). Employee B
earns £24,000 full-time equivalent salary and works 18.5 hours per week (out of
37 hours) for 10 years, then a pension equal to 5/60th of £24,000
(£2,000) will be payable and the contribution rate due is 6.5% (total
contributions paid are 10 x £12,000 x 6.5% = £7,800)
However, the argument that Employee B has paid
more for the same benefit is not valid as the basis of all part-time equality
legislation is the need to judge the case against an equivalent full-time
comparator employee, not against someone doing a completely different job.
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Is it discriminatory that additional hours worked
by part-timers would not be pensionable?
The regulations at present (Reg 12(3)) state
that for members’ contributions the pay of a part-time employee for any period
is the pay he would have received if during that period he had worked the
contractual hours. Therefore, if a part-timer is contracted to work 25
hours, then contributions may only be paid on the 25 hours. We believe
that this regulation will also be included in the new regulations.
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For staff who have
retainers, could it be an idea to go back to ‘smoothing’ as some employers may
previously have done?
It
is the employer’s responsibility to decide how pay is treated for the purposes
of allocating a member to a contribution rate, but from NILGOSC’s perspective,
smoothing may simplify administration.
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Pay differences, e.g. pay increases, acting up, maternity
If cost of living
increases are only advised in October, how should they be dealt with?
The recommendation here is
to allow the member to stay on the same rate for the remainder of the year. The
band can then be reassessed at 31 March of that year.
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What if someone starts
acting up part way through the year? After how
long does acting up affect the contribution rate?
As
acting up is normally temporary, the member’s percentage rate should not be
adjusted during the year. If the acting-up is likely to apply for the whole of
the next year then employer could include this when determining band at 31st
March.
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If someone is on
maternity leave, how is their contribution rate calculated?
Members on maternity leave must pay contributions at their original
rate. Those who go on reduced pay during the year must continue to pay
contributions at the rate they were placed in but on the reduced amount of
pensionable pay they receive. When determining a contribution rate for those
staff already on half pay or no pay at 31st March, their
contribution rate must be based on their FTE rate of pay that would have been
received including the estimated annual value of any other pensionable
allowances.
The same principles will apply for those on parental leave, paternity
leave, adoptive leave, sick leave (half pay, no pay, SSP) or career breaks.
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What if a member receives
a substantial back dated pay award that runs over previous years? What rate do
we use?
Back-dated pay awards will have employee contributions deducted at the
rate that has already been set for the year i.e. employee with full-time
equivalent pensionable pay of £17,000 (5.9% rate) receives an additional £4,000
of arrears of pay. Contributions on these arrears are deducted at the
employee’s standard rate of 5.9%.
Employer contributions should be
deducted at the employer rate that has been set for the year in which the arrears are paid.
If the arrears were payable due to a job re-evaluation and the revised
rate of pay going forward affects the contribution band, the band should be
changed for the next payroll period as it is a permanent material change which
affects pensionable pay.
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Most schools revise
contracts and make new appointments in September – what happens if the pay
increase here affects the band they go into?
If
a contract is revised and pay increases, this is considered to be a material
change and the banding should be revised. Newly appointed staff should have their contribution
rate based on the full-time equivalent annual pensionable pay for the job plus
the estimated annual value of any other pensionable allowances.
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Is the pay rate at 31st
March used for the bandings? What about the April pay increase that we know is
due but don’t know what it is, e.g. the NJC increases were only advised in
October?
It is our recommendation
that contribution rates are determined with reference to the pay rate at 31
March as this pay rate is readily available to employers. The recommendation for
the April cost of living increase is to allow the member to stay on the same
rate for the remainder of the year. The band can then be reassessed at the next
31 March. However, the employer must have a policy on this to ensure
consistency.
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What do we do for
someone who we know will be going up a spine point from 01 April?
We
recommend that the rate as of 31 March is used for ease of administration, but
this is ultimately an employer decision. Some smaller employers may wish to
project forward as they have may have the resources to do this. Employers need
to ensure that their policy is applied consistently so that all employees will be treated
the same.
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If someone who receives
variable payments has their contribution rate based on an estimated bonus, but the
bonus actually received is lower than expected, their pay for the year may have
meant they should have been on a lower contribution rate. If this happens,
should the member be refunded the difference in the two rates?
No,
there should be no refund of any contributions. Employers should
endeavour to include a realistic bonus figure in their estimates. The
rate should
be adjusted for the following year based on pensionable pay for that
year to 31
March.
Notification of contribution rates
How will employers
notify NILGOSC of individual contribution rates?
A
spreadsheet will be available shortly to all employers which must be used to notify NILGOSC
of contribution rates. The spreadsheet must be returned securely to NILGOSC, that is, in accordance with your Data Protection
policy.
Will there be changes to
the Annual Return? Can NILGOSC not just pick up contribution rates from the
Annual Return?
The Annual Return will be
amended as it will be necessary to identify the amount of contributions at each
contribution rate, i.e. a member may have more than one job and more than one rate
of pay, or they may change bands during the year, so each job needs to be
posted separately. It will also be necessary to add an additional column to
record ARCs.
NILGOSC cannot pick up the
initial rate from the Annual Return as we need the contribution rate in advance
to form part of the checking procedure. Details of all amendments will follow
as soon as possible.
How do I inform
employees of their contribution rate?
The
method of informing employees is an
employer decision. However, suggestions are to use advices on pay slips or
write to employees. Regardless of how they are notified, each employee MUST be
notified individually of their rate and how to appeal. Click here for an example letter which may be used to advise members of their contribution rate.
How often do you need to
tell people their contribution rate and how to appeal, e.g. every month, every
year?
The
regulations require the employer to inform the member any time their rate
changes. Unless the rate changes, the original notification is sufficient.
Appeals
What is the procedure
for the right of appeal to the County Court?
Appeals
to the County Court only apply to decisions made by the employer and these
appeals follow the normal County Court procedure. It will be necessary for each
employer to establish a policy regarding appeals and inform each employee. NILGOSC
will have no involvement in disputes between employer and employee regarding
contribution banding rates.
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Could our Statutory
Dispute Resolution Process be used instead of appeals to the County Court for
disputes over the band an employee has been allocated to?
Each
employer is required to establish a policy on appeals concerning contribution
rates and it is up to the employer whether they wish to incorporate the
Statutory Dispute Resolution Process into their policy. However, the Statutory
Dispute Resolution Process cannot take the place of appealing to the County
Court, as it must always be made available to the member.
General
Will the contribution bands change before they come
in on 1 April 2009?
Yes, we have now been informed by the Department of the Environment that
the initial rates advised to employers will be increased by 5% to take account
of inflation. Click here for the poster which has been revised to include the
new rates.
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Are the tiered rates
illustrated already in use in England?
Yes.
The rates initially advised are currently being used in England and Wales, and they will move to the same rates as
Northern Ireland
as of 1st April 2009.
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As the scheme comes in
on 1st April, what happens if payroll straddles the period bridging
March and April?
The new contribution rates are to be applied from the first pay period
in each new tax year. i.e. Week 1 or Month 1.
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Why do the contribution bands make high earners pay
more when they are only getting the same benefits?
NILGOSC, as administrators
of the scheme, must follow the regulations as made by the Department of the
Environment and we understand that the Government’s intention was to make the
scheme more accessible and affordable for lower paid employees.
Higher rate tax payers receive
a greater level of tax relief on their pension contributions.
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Ill-health
If you are retired on
grounds of ill-health in the lowest tier, are you obliged to look for work?
There is no obligation to
look for work, but it should be noted that pension benefit entitlement is based
on capability to gain employment. If
the member becomes capable, the pension will cease.
The member must inform
NILGOSC immediately if gainful employment has been obtained.
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If you are reviewed by
the Committee in tier 3 and are subsequently moved up to tier 2, is the tier 2 ill-health
backdated?
No,
there will be no facility in the regulations to allow backdating of ill heath pensions.
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Do you expect the number
of ill-health applications/acceptances to go up in the new scheme?
We
do not expect the number of acceptances to increase as the member must be
permanently unfit to do their own job. This criterion is common to both the
current scheme and the new scheme
from 1st April 2009.
It is important that employers understand the criteria for ill-health retirement and refer members appropriately.
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What if a person who
leaves under Tier 2 later becomes a Tier 1?
There
is no facility for movement between Tier 2 and Tier 1 as the decision by the
doctor, qualified in Occupational Health Medicine, will be based on the medical
evidence pertaining to the application at that time.
If
the member is unhappy with the original decision to be placed in Tier 2, they
can appeal this decision. The Committee and doctor must have regard for the
Statutory guidance on ill-health provided by the DOE.
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Can an employer appeal the
Committee’s decision regarding ill-health?
No.
Regulation 55 (1) of the Administration Regulations (currently in draft form)
clearly states that applications to decide a disagreement must be made by the
member or an alternative applicant, the alternative applicant route only being
used in disputes where the member has died. Therefore, the member must sign the
initial correspondence to authorise the appeal in the case of ill-health
disputes.
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Scheme Entry
What do we do with a
person who works casual part of the year and on a rota basis for the remainder,
e.g. seasonal guides?
Eligibility to join the
scheme in this instance will depend on the contract. The contract needs to be
for three months or more, with a mutuality of obligation between employer and
employee.
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What happens if an
employee has a 2 month contract and can’t be brought in? Or a person joins
employment on a temporary contract, for example those covering sick leave who end
up staying for more than three months? Will membership be
backdated if their contract is extended and they then meet entry criteria?
Yes.
If the employment has been continuous
for more than the three month period, the employee must be given the option to backdate
their membership.
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Those who opted out…
Will the current LGS2
Opting Out form be valid when contacting those who previously opted out or can
NILGOSC provide one for the new scheme?
We
will revise the current LGS2 to incorporate information on the valuable
features of the new scheme. However,
we cannot make this available until the new regulations are made.
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Will resources be made
available to help employing authorities when contacting those who previously
opted out and for the new scheme
changes?
We
will make available templates and guidance to aid employers in this process. We
will issue a ‘Short Guide’ booklet on the new scheme, although this cannot be
made available until the regulations are made.
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If we have employees who previously opted out, how do we tell them and will NILGOSC help us?
The
new regulations do not require employers to contact those who
previously opted out. However, NILGOSC strongly advises employers to
contact those employees who have opted out to advise them of the new scheme. Resources such as
posters, updates on our website and an article are available for employers
to use for their intranet or staff magazines. The revised LGS2 opt out form will also help
when it is available. Please note that NILGOSC does not have any information
on any of these employees, nor any right to information
on these employees under the Data Protection Act.
Should you check with
all your employees (i.e. those who may have opted out previously) if they now
want to opt in to the new scheme?
Any members of the current scheme will automatically transfer to the new scheme on 1st April 2009. We
recommend that you check with non-members if they want to opt in, as they
will have opted out based on the information given to them on the current
scheme. These employees need to be given the opportunity to assess the value to them the benefits of the new scheme. Contacting
these employees and recording any correspondence will reduce the possibility of
litigation for your authority in future years.
General
Will any delays in the
DOE making regulations delay the introduction of the new scheme and the
implementation of the new banded contribution rates?
The regulations cannot be implemented until they
are made. We expect the regulations to be made in January so the implementation
should go ahead as planned on 1 April 2009.
What
about multiple employments within 1 contract? Do we split each job and
create a contract for each?
Yes, we recommend that
this should happen. When contracts are split, NILGOSC should be notified so
that we can split our files. This is particularly important as different jobs
may attract different rates of pay, in turn affecting contribution rates.
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Due
to payroll cut off we are unable to send in LGS1s before the end of the month
and pay is known. Also we are unable to send leavers’ forms until after
final payment. Do you have any suggestions on how we could ensure that we
send in forms within agreed service levels?
We presume salary rates
used for LGS1s are the same as the salary advertised for the post. Therefore we
would expect no delays due to payroll cut off dates as the information should be available from Human Resources.
We are looking into electronic means of collecting the LGS1 information and we will inform
employers of this as soon as we have found a suitable way of doing this.
In terms of LGS15s for
leavers, the service standard for these is 5 working days after date of leaving
or date of final payment if later.
This should be a sufficient amount of time for forms to be completed and sent
to us.
The time frames outlined for each process in our
Service Level Agreement are determined with reference to our statutory
obligations to our members. We must write to our members within 2 months of the
date they join the scheme, and we must pay benefits within one month of the
date they become payable. Click here to see the standards for employer
notifications.
Is regular overtime
pensionable? If it is, can an employee choose not to pension this portion of
their pay?
Overtime
is only pensionable if it is contractual,
and if it is contractual, contributions must
be taken on it. If a contract states that overtime is ‘as and when required’, pay for this overtime is not pensionable.
It
is therefore an employer responsibility to specify in the contract whether
overtime is contractual, as well as specifying which other emoluments are
pensionable (e.g. performance related pay). The regulations state what is and is not
pensionable, so employees cannot make their own decision on this.
Below is the meaning of "pensionable pay” is described in the
regulations.
(1) An
employee’s pensionable pay is the total of—
(a) all the salary, wages,
fees and other payments paid to him for his own use in respect of his
employment; and
(b) any other payment or
benefit specified in his contract of employment as being a pensionable
emolument.
(2) But an
employee’s pensionable pay does not include—
(a) payments for
non-contractual overtime;
(b) any travelling,
subsistence or other allowance paid in respect of expenses incurred in relation
to the employment;
(c) any payment in
consideration of loss of holidays;
(d) any payment in lieu of
notice to terminate his contract of employment; or
(e) any payment as a
inducement not to terminate his employment;
(3) No sum may be taken into account in
calculating pay unless income tax liability has been determined on it.
In terms of cost sharing
do you see any difficulties for members?
The
Department of the
Environment will shortly be consulting on a future cost sharing
mechanism for the scheme. Therefore we cannot comment on this at
this
time.
Are there any plans for
tiered employer contribution bands?
No.
The actuary determines
the common scheme employer rates every three years. The actuary may
adjust an employer's contribution rate to take account of circumstances
relevant to the employing authority. The next actuarial valuation is at
31 March 2010.
After issuing a Certificate of Protection,
employers need to keep 10 years of pay records as employees can elect to use
the best 3 consecutive years of the last 10 to have their benefits based on.
Will copies of P14s or P60s be sufficient for this?
No.
P14 or P60 pay may not
be the same as pensionable pay. We recommend in these cases that
employers keep a copy of the annual returns relating to the previous 10
years.
Do Certificates of Protection cover those who
voluntarily reduce their hours?
No. Certificates of Protection
only apply when there is an enforced reduction in pay.
New Employing Authorities with
effect from 01.04.09 e.g. NILA
Under TUPE arrangements,
a number of staff from Education and Library Boards will join the NI Library
Authority on 1st April 2009. As the pay rate is based on earnings at
31st March 2009, is it the responsibility of the ELBs to inform the
staff of their rate before they transfer?
Does the ELB also have
the responsibility of contacting previous opt outs?
Who would the new NILA
staff appeal to if they weren’t happy about the rate they were on?
The
new Northern Ireland Library Authority and the Education and Library Boards
must reach agreement on these issues themselves. Regardless of which authority
takes responsibility for this, employees must be informed by 31st
March 2009 of their contribution rates and the right of appeal.