Automatic Enrolment: Workplace Pension Duties for Property Company Employers

Most single-director property SPVs never think about workplace pensions, and they are right not to — they are exempt. The problem is that the exemption disappears the moment the company takes on its first member of staff, and a surprising number of developers only find that out after The Pensions Regulator has already written to them.

Why most property SPVs are exempt to begin with

Automatic enrolment duties apply to employers, and a company with no employees — just directors, none of whom (or only one of whom) has a contract of employment — is not an employer for these purposes. The Pensions Regulator calls this a director-only company, and it is the default position for a huge number of single-purpose property companies: one director, no staff, no duties.

That exemption isn’t automatic in the paperwork sense, though. New companies are typically written to by The Pensions Regulator and need to confirm they meet the director-only criteria, either online or by phone, so the exemption is recorded rather than assumed. Ignoring the letter on the basis that “it obviously doesn’t apply to us” is a common way small compliance issues turn into bigger ones later.

What changes the moment you take on staff

The exemption is genuinely narrow. It covers directors only, and only where there is no contract of employment (or at most one director has one). It does not extend to:

• A site manager, project manager or quantity surveyor taken on as an employee
• A bookkeeper, PA or office administrator, even part-time
• A second director who does have an employment contract, once that arrangement exists alongside another director
• Seasonal or fixed-term staff brought on for a single development phase

The day any of these people start, the company becomes an employer with automatic enrolment duties from that date — the duties start date. There is no threshold based on hours or number of staff; taking on one part-time bookkeeper is enough to trigger the full set of obligations.

Who actually has to be enrolled

Not every member of staff needs to be automatically enrolled, but every member of staff needs to be assessed. The categories are:

• Eligible jobholders — aged between 22 and State Pension age, earning above the earnings trigger, currently £10,000 a year. These must be automatically enrolled.
• Non-eligible jobholders — earning above £6,240 but not meeting the age or earnings trigger for automatic enrolment. They can opt in and the employer must then contribute.
• Entitled workers — earning below £6,240. They can ask to join a scheme, but the employer isn’t required to contribute if they do.

Contributions are calculated on qualifying earnings, the band between £6,240 and £50,270 a year, not on the full salary. The statutory minimum is 8% of qualifying earnings in total, made up of at least 3% from the employer, with the balance from the employee including basic rate tax relief added to the contribution automatically under a relief-at-source scheme.

What genuinely self-employed subcontractors mean for this

A property developer engaging CIS subcontractors on a genuinely self-employed basis has no automatic enrolment duty towards them — the duties attach to workers, and a true self-employed subcontractor working under their own control isn’t a worker. The risk sits with the same grey area covered by deemed contractor status and off-payroll working rules: if HMRC, an employment tribunal, or a pensions dispute later finds that someone treated as self-employed was, on the facts, a worker — subject to control, required to do the work personally, with no genuine right of substitution — automatic enrolment duties can be found to have applied retrospectively, on top of any PAYE and NIC exposure. Getting the underlying employment status right protects both positions at once.

Postponement, staging and re-enrolment

Three mechanics matter once duties apply:

• Postponement. An employer can postpone assessing a worker for up to three months from the date duties would otherwise start — useful for short-term or seasonal site staff who may leave before the three months are up, avoiding the administrative churn of enrolling and then immediately processing an opt-out.
• Declaration of compliance. Within five months of the duties start date, the employer must complete a declaration of compliance with The Pensions Regulator confirming what has been done. Missing this deadline is one of the most common enforcement triggers, often for employers who genuinely did set up a scheme but never filed the declaration.
• Re-enrolment. Every three years, on a date the employer chooses within a set window, staff who previously opted out must be reassessed and re-enrolled if they still meet the criteria, followed by a fresh re-declaration of compliance. It is easy for a small property company to remember the initial set-up and then forget the three-yearly cycle entirely.

Salary sacrifice and the wider picture

Many employers, including property companies, deliver pension contributions through salary sacrifice, which reduces both employee and employer National Insurance on the sacrificed amount. For a company already thinking about director remuneration structuring, this sits alongside the wider question of how pension contributions interact with the forthcoming salary sacrifice pension NIC cap, and with how much annual allowance is actually available before a large employer contribution is made — see our guide to pension annual allowance tapering for how that caps contributions for higher earners.

What happens if a company gets it wrong

The Pensions Regulator’s enforcement escalates in stages: an informal reminder, a formal compliance notice, then a £400 fixed penalty if the notice isn’t actioned, and escalating daily penalties — from around £50 a day for the smallest employers up to £10,000 a day for the largest — if non-compliance continues. Persistent refusal can lead to court proceedings to recover unpaid contributions directly. For a small property company the sums involved in the underlying pension contributions are often modest; the penalties for simply not dealing with the paperwork are not.

Common mistakes

• Assuming the director-only exemption still applies after the first employee is taken on, without reassessing duties from their start date
• Treating genuinely self-employed CIS subcontractors as outside scope without checking the underlying employment status actually supports that
• Missing the declaration of compliance deadline after correctly setting up a scheme
• Forgetting the three-yearly re-enrolment cycle once the initial set-up is done and filed away
• Not using postponement for genuinely short-term or seasonal staff, creating unnecessary administration for people who leave within weeks

Getting the basics in place early

For a development company scaling up from a single-director SPV to a business with a site team, office staff and multiple projects running at once, automatic enrolment duties are one of several employment obligations that arrive at the same time as PAYE registration and employer's liability insurance. Getting the scheme, the declaration and the payroll integration set up correctly from the first hire avoids a retrospective clean-up exercise later. It's a natural conversation to have alongside a wider review of how the business is structured as it grows — something we cover under our Property Advisory service.

Common questions

Does a director-only property SPV need to set up a workplace pension?

No. A company where the only people working for it are directors, and none of them (or only one) has a contract of employment, is exempt from automatic enrolment duties. Most single-director property SPVs fall into this category and can tell The Pensions Regulator they are exempt rather than setting up a scheme.

When do automatic enrolment duties start for a new employee?

From the worker's first day of employment, known as the duties start date. There is no grace period built in automatically, although an employer can choose to apply postponement of up to three months from that date, which delays assessment rather than removing the duty.

What are the minimum workplace pension contribution rates?

The statutory minimum is 8% of qualifying earnings in total, with the employer required to contribute at least 3%. The remainder comes from the employee, with a portion made up of basic rate tax relief added automatically to a relief-at-source scheme.

What happens if a property company doesn't comply with automatic enrolment?

The Pensions Regulator can issue a compliance notice, followed by a fixed penalty of £400 if it isn't actioned, and then escalating daily penalties that scale with the size of the employer if non-compliance continues. Persistent failure can also lead to court action to recover unpaid contributions.

This article is general information, not personal tax advice, and tax rules change. Your own position depends on facts we cannot see from here — please take advice before acting on anything above.

← All articles