Do you pay any staff?
If YES, Auto Enrolment affects you and you must take action
What is Auto Enrolment?
The law on workplace pensions has changed. Every employer with at least one member of staff now has new obligations, including putting those who meet certain criteria into a workplace pension scheme and contributing towards it.
This is called automatic enrolment. It’s called this because it’s automatic for your staff – they don’t have to do anything to be enrolled into your pension scheme. But it’s not automatic for you. You need to take steps to make sure they’re enrolled.
How much will it cost me?
You will have to contribute a minimum 1% of qualifying earnings; this will increase to 2% in March 2018 and 3% from April 2019. Your staff will also have to contribute a minimum of 1%, 3% and 5% respectively.
There will also be other costs to consider, such as setting up your scheme, getting payroll software to manage automatic enrolment and any independent advice you might decide to take.
When does this start?
Auto enrolment is being phased in. It started in 2012 for large employers and the final stage for businesses employing less than 30 staff starts from June 2015. All business should be set up by April 2017.
You will be notified in advance of your starting date, called the Staging Date, but in the meantime you can find out what it is by going to the Pensions Regulator web site. You will need your PAYE reference number.
Does this apply to all staff?
Those aged between 22 and the state pension age and earning at least £10,000 a year are automatically enrolled but others have the right to opt in.
What about casual and part time staff?
No difference, they have to be included if they meet the same pay and age conditions. The hours they work are irrelevant. However, you will be able to postpone enrolling any new worker for up to 3 months to avoid the need to include temporary staff.
Can I choose not to get involved with all this?
No but individual staff members can choose to opt out once enrolled. This has to be their decision; you cannot influence them in any way.
How are the contributions collected and paid over?
The contributions can be calculated using payroll software although as this is outside the normal PAYE environment you will have to make a separate declaration to the pension provider and make arrangements to pay them directly.
What steps do I have to take?
The key stages are:
- Find out when you need to be ready – your Staging Date
- Work out who you need to enrol
- Make sure that your payroll software/payroll bureau is able to handle auto enrolment
- Choose a pension scheme (or check your existing one)
- Make sure you know how and when to communicate with staff
- Assess and enrol your staff
- Write to your staff initially and when there is a change
- Maintain required records and fulfil ongoing responsibilities
Where can I get advice?
A good start is to go to The Pensions Regulator web site at www.thepensionsregulator.gov.uk where comprehensive guidance can be found including a step by step guide. Download ‘The essential guide to automatic enrolment’ to help you get started.
You may want to speak to an independent financial advisor. Pensions are a complex subject and competent advice should be sought.
Providers such as NOW Pensions and People's Pension offer flexible pension schemes that come with low charges, as does NEST the workplace pension scheme set up by the government.
But low-cost and simple is not for everyone, it might be you want your employees to have access to a wider range of, for example, investment options, for which the traditional pension providers will be better placed but costs will be higher.
If you use an external bureau to run your payroll (such as the Shepherd Partnership) speak to them as they may already have an arrangement with one of the providers.
Even if you employ just one person. Act now. It’s the law.
Start preparing now to ensure a smoother transition and less upheaval when the time comes to enrol staff.
Failing to meet your auto enrolment obligations can result in significant penalties starting at £400.
Please note that the purpose of this information is to highlight your obligations and is not a substitute for taking competent advice on how the changes affect you.
For more information or advice, contact us on 01756 799823 or email@example.com.