Tesco, Asda, Eddie Stobart, B&Q, Edf Energy – and now you! Any of us who pay staff need to be ready for Auto Enrolment – the new workplace pension enrolment for employers to make available for all qualifying staff.
Auto enrolment is designed to give every working person access to the facility to make savings for pensions. As the name suggests, it is an automatic enrolment and every employee meeting the requirements is automatically enrolled and it’s then their choice to opt out.
As an employer you cannot escape this. Any business, even with one employee – including limited companies where you own the business and are the only employee – must take action.
Each employer has a date by which they must be registered with a pension scheme, called the staging date – it will have probably already been communicated to you. This can also be found on the pension regulator’s website by entering your employer’s PAYE reference. Once you know your staging date you will need to set up a pension scheme – either yourself or with the help of a professional.
You must tell your employees about auto enrolment and give them details of how this effects them. This may be something you can do yourself or your professional adviser may help with, or the chosen pension company will support with this.
All employees must be automatically enrolled and make minimum payments if they are:
• Aged between 22 and state pension age
• Work in the UK
• Earn over £10,000 per year
Employees who don’t meet the above indicators may still choose to be enrolled. You would have to enrol them but, as employers, you wouldn’t have to make a contribution for them if they earn below around £111 per week. Some employees may wish to opt out; this is their choice and they can do so once enrolled by you. Those who have opted out will have an option to opt back in at certain future dates.
Once your scheme and employees are all set up you need to notify the pensions regulator you have met their requirements. Again, this is something you or your professional adviser can do.
Payments into the scheme will need to be calculated and made at pay date intervals and these will be guided by percentages that are minimum requirements. As the employer, typically you will make a deduction from the employee’s pay for their contribution and add this to your payment and forward this to the pension company.
Each pay date all employees not in the scheme will need to be monitored to see if they are now eligible, whether they have reached 22, had pay increases or changed their hours of work. Monitoring all employees for changes will become an ongoing obligation. Most payroll software will be able to handle the checking of employees once the data is set up for them.
Once up and running I am sure we will all find this fairly smooth to operate. We run many payroll runs for our clients and hope we will help make this as easy as possible.
However don’t delay in being prepared for this, take action sooner rather than later and beat the rush.