Auto enrolment (AE) is a statutory requirement and will affect most businesses with staff. It is the responsibility of employers to automatically enrol all of their eligible staff, although employees can choose to opt out.
Employers will need to:
- assess their staff for eligibility
- provide a qualifying AE pension scheme for relevant employees
- write to their employees explaining how AE applies to them
- automatically enrol all eligible personnel into the scheme and pay employer contributions
- register with The Pensions Regulator and keep records
When AE duties come into force depends on the staging date for your business. You can find out your staging date by entering your PAYE reference onto The Pensions Regulator website. There is an option to postpone AE for up to three months from your staging date.
Who needs to be automatically enrolled?
Staff who are:
- aged between 22 and state pension age
- working in the UK
- earning upwards of £10,600 a year
Some staff who don’t meet the criteria above are able to opt in to the pension scheme and employers must put them in if they ask.
As an employer you will have to pay a minimum employer contribution for all staff you put into the scheme. Certain other staff can ask to join a pension scheme. You must put these staff into a scheme but the rules are different and there is no requirement to pay an employer contribution.
The law came into force on 1 October 2012 but there has been a staggered implementation based on the number of employees.
Ultimately employers will need to make a three per cent minimum contribution, but to ease the burden the rates have been reduced initially.
|Employer’s minimum contribution||Total minimum contribution|
|Employers staging date up to 30/09/2017||1%||2%|
|01/10/17 – 30/09/18||2%||5%|
Employers must register with The Pensions Regulator within five months of the staging date (subject to postponement) to:
- confirm AE procedures have been correctly followed
- provide various information such as number of eligible employees enrolled
It is fair to say that AE is not simple and will undoubtedly place extra administration and financial burdens on your business.
Whilst we can’t do too much about the latter, we can help you to make this as pain-free as possible. If we already operate your payroll then we will work alongside you as much as you need to ensure that you are compliant. We use specialist software to ensure the necessary ongoing assessment of your workforce and communications with staff.
You may need to get advice on any existing pension schemes or setting up a new one. Whilst we are not able to give this advice ourselves, we do work with an Independent Adviser who can.
You may also need to review your current HR practices to ensure that they do not contradict the AE rules.
It is worth noting that if you own your own business and the only people on the payroll are the directors, then it is likely that you will not be classed as an employer for AE purposes and, therefore, will not need to comply with the rules. However, you still need to confirm this with The Pensions Regulator. If you take on any employees in the future then you are likely to fall under the AE rules for them so you must be mindful of this.
As ever, non-compliance with AE can lead to hefty fines so it is not something that can be ignored. You are also not allowed to influence/incentivise your staff to opt out of AE, so for many employers it will soon be a way of life.
Contact us for more information.