WORKPLACE PENSIONS – AUTO ENROLMENT: EMPLOYER DUTIES
WHY?
The Government introduced a new pension law to get more people saving for their future. As an employer, you will have new duties in relation to everyone working for you who are aged between 16 and 74; who works in the UK and for whom you deduct tax and NIC from their wages. Most employers will have to choose and contribute to a workplace pension scheme suitable for automatic enrolment which must meet quality standards. Employers will have to automatically enrol some workers into a workplace pension scheme and give others the option to join. The employer duties are not optional. The Pensions Regulator (TPR) will ensure employers comply or face hefty fines or even imprisonment!
WHEN?
New employers”Staging Date’ will start as soon as they have employees. All employers must register with The Pension Regulator within 5 months of their staging date, even if they have no employer duties for their staff.
WHO?
Employers must assess their workforce to determine whether they’re to be treated as a ‘worker’. Initially this assessment is required on the staging date, but your duties don’t just stop once you’ve enrolled all your staff – they become part of your business as usual. You must assess your workforce regularly, ideally before each payroll run in order to assess all new joiners or a change of worker category. Workers fall into 3 categories:
Eligible jobholder:
* Aged between 22 and state pension age
* Annual earnings between £10,000 and £42,384
* Must be automatically enrolled
Non-eligible jobholder:
* Aged between 16 and 75
* Annual earnings above £6,144
* Has a right to opt-in and employers must contribute
Entitled worker:
* Aged between 16 and 75
* Annual earnings less than £6,144
* Has a right to join but employers do not have to contribute
WHAT?
For auto enrolment pension schemes, the minimum contributions that both the employee and employer must contribute are usually based on a percentage of total earnings.
employee pays 5%
employer pays 3%
HOW?
After you have chosen a scheme you must write to all your workers telling them what’s happening and what their rights are. You will need to review your payroll arrangements and make sure their data is up to date. You need to pay the correct contributions on time to your staff pension scheme. Employees’ contributions will be deducted from them through the payroll, therefore employers, their payroll department and the pension provider will all have to work closely together.
Preparations for auto enrolment will greatly impact your time. You may be able to absorb all of the preparations in-house or you may decide to bring in additional help. You may have to buy or enhance software to manage the day-to-day activities of auto enrolment. This will usually be your payroll system. Speak to your payroll provider about what they can offer. Most payroll providers should be able to provide the employer and pension provider with reports of the eligible workers and the contributions payable. Some payroll providers may even be able to make the payments to the pension provider for you via BACS.
COSTS
Apart from time costs, you must also anticipate the financial costs involved with auto enrolment. You may already have a pension scheme in place, but does it comply with auto enrolment quality standards? Your current scheme may need to be revised and this could be costly. You may need to seek advice from an independent financial advisor, where there will usually be a fee. The main area in which you may want to seek financial advice is finding a pension scheme that is most suited to your business.
For more information and guidance, go to The Pension Regulator website.
As a payroll bureau, we can assist our clients in the ongoing administration of assessing the workers each pay period, enrolling eligible workers, making the deductions and producing the necessary pension reports for your pension provider. However the responsibility lies with the employer to select a qualifying pension scheme, get it set up in time and then make the declaration of compliance with The Pensions Regulator within 5 months of the staging date.