Aon announced today that it is looking to cut the contributions it makes as an employer into the occupational pension scheme by up to 50%. Whilst this may be an attractive option for some employer's given the costs of particularly occupational schemes, it is important to remember that an employer cannot unilaterally change the amount of contributions it makes.
Firstly it may be a contractual entitlement, given that pensions are regarded as deferred wages, for the employer to pay a particular percentage of an employee's salary into the pension scheme, Secondly regulations mean that there has to be a minimum of 60 days consultation with employee representatives or trade unions (where one is recognised in the workplace) before certain prescribed changes can be made. These include removal or reduction of employer contributions or increasing member contributions as well as other changes. A failure to consult can now result in a penalty being imposed by the Pensions Regulator of £50,000.
It is therefore important that if an employer is considering changing the contributions they make to an occupational or personal pension scheme that they fully consult with their employees and do not impose the change unilaterally.
Of course this may only be one of a number of options employers are considering when looking to save costs, whether or not with a view to avoiding or minimising redundancies, and employees in the present climate have been more willing to consider reductions in hours or wages if it means saving jobs.
Noele McClelland, Partner
Employment Law Team