Retirement saving is an important issue, especially as the law has changed and is now very much in force in the UK. People are living longer and need more money in retirement, it really is that simple. Millions of us not are not saving any money at all, let alone putting money away for our retirement, and that’s exactly why automatic enrolment was introduced. Find out more about auto enrolment, and what you need to do as an employer.
What is auto enrolment?
Every employer must automatically enrol workers into a workplace pension scheme if they are aged between 22 and the state pension age, earn more than £10,000 a year and work in the UK.
Follow this seven-step checklist below to ensure you understand your auto enrolment obligations and what to do about them.
Know your staging date and when to act
Your staging date is the deadline by which you’ll need to have a scheme in place.
- Any employer with a PAYE scheme registered before 1st April 2012 must have enrolled their staff by April 2017
- Any employer with a PAYE scheme registered from 1st April 2012 must have enrolled their staff by February 2018
Assess your workforce
If you have at least one employee, then auto enrolment applies to you. Even if you just employ someone to work for you like a cleaner or nanny, you are legally an employer. Workers who need to be automatically enrolled into a qualifying pension scheme are called ‘eligible jobholders’. An eligible jobholder is:
- aged between 22 and state pension age (you can check the state pension age online)
- working or ordinarily working in the UK
- earning above £10,000 (this amount is reviewed by The Pensions Regulator each year)
When you have figured out which of your employees is an eligible jobholder, you must:
- automatically enrol eligible jobholders into a qualifying pension scheme, and..
- make employer contributions on their behalf into that pension scheme
Workers who are not eligible jobholders still have the right to opt-in to a pension scheme or the right to join one. And depending on how much they earn, you may need to pay contributions for them.
Review your pension arrangements (or select a scheme if you don’t have one)
If you have an existing pension scheme for your employees, you can consider enrolling all eligible jobholders into this scheme. But you’ll need to check with the pension scheme provider that your scheme qualifies for auto enrolment. We recommend speak to the TPR for clarification.
If you don’t have an existing pension scheme or you can’t use your existing one(s) for auto enrolment, you’ll need to choose another one. In this case, you’ll have to automatically enrol all eligible jobholders in your new pension scheme.
Communicate the changes to all your workers
You are required to write to each of your employees after your staging date to tell them:
- their auto enrolment rights
- how automatic enrolment applies to them
- what you’ve done for them
- why you’ve done it
- the details of the pension scheme you’ve chosen for them
- what contributions will be deducted from their pay
- that they have a right to opt out of your pension scheme if they wish to
Automatically enrol your eligible employees
As an employer, auto enrolment is one of your basic duties. You need to remember some key points:
- Automatic enrolment is not optional
- As an employer, you must have a qualifying pension scheme in place
- You must automatically enrol ‘eligible workers’ into that scheme and make contributions on their behalf
- Your employees can choose to opt out (but they must be enrolled in a qualifying scheme in the first place)
- You have to register with The Pensions Regulator (TPR)
Complete your declaration of compliance for The Pensions Regulator and keep records
You need to provide certain information to the regulator about how you’ve complied with your auto enrolment duties. You’ll need to complete a declaration of compliance even if you don’t have anyone to automatically enrol. The declaration is required by law and you could get fined if you don’t do it in time.
Contribute to your workers’ pensions
Initially, the auto enrolment contributions to your qualifying scheme are as follows:
- you (the employer) contributes 1 percent of your employee’s salary
- your employee contributes 1 percent of their salary
- the government may add any tax relief to the pension
By late 2018, the contributions increase to:
- you (the employer) contributes 3 percent of your employee’s salary
- your employee contributes 5 percent of their salary
It is vital that you understand your automatic enrolment responsibilities. You are legally required to do so and The Pensions Regulator can fine businesses that don’t follow the law.
Over 95% of our clients use our payroll service. If you need help with your payroll and auto enrolment please contact us.
