Auto enrolment means that over the next few years every UK employer must have a pension scheme which satisfies certain qualifying criteria and into which employees can be automatically enrolled if they:
- are aged between 22 and State Pension Age
- earn more than £10,000 per year (2014/15 limit, this amount will change)
- work in the UK
The Pensions Regulator is urging businesses to start planning for automatic enrolment at least 18 months in advance of the date it comes into effect in order to ensure full compliance. Hefty fines will be levied against businesses that fail to be ready in time.
The following are 7 key steps to help prepare your company:
1. Know your auto enrolment staging date – when you act
The date that the new law applies to your company is known as your staging date.
This date is determined by the size of your largest PAYE scheme as at 1st April 2012. Companies that have PAYE schemes that are shared by multiple employers will have the same staging date in most cases. For multiple companies within one organisation, it is the largest employer that will dictate the staging date and this date will apply to all companies of that PAYE scheme.
More information about staging dates can be located here.
2. Assess your workforce
Workers who will need to be automatically enrolled in a pension scheme are called ‘eligible jobholders’. An eligible jobholder is:
• aged between 22 and state pension age
• working or ordinarily working in the UK
• earning above £9,440
In order to work out which employees need to be automatically enroled within the scheme at the outset you will need to be able to assess your employees against this criteria.
You will also need to continually monitor their eligibility which is particularly onerus with employees with more flexible working arrangements or remuneration.
3. Review your pension arrangements
If you have an existing pension scheme for your workers, you may wish to consider enrolling all eligible jobholders into this scheme. To do this, your existing scheme will need to qualify as an automatic enrolment scheme – see information on qualifying schemes below.
To be a qualifying scheme, minimum contributions must be made or it must provide a minimum rate at which benefits will build up. A scheme suitable for automatic enrolment must also not:
• Impose barriers to joining the scheme, such as probationary periods or age limits for members
• Require staff to make an active choice to join or take other action prior to joining
• Require the provision of extra information in order to stay in the scheme
Where you do not already have a suitable pension scheme in place you will need to arrange for one to be set up into which you can enrol any elible workers.
4. Communicate the changes to all your workers
You must inform all your workers in writing about the changes detailing how they are affected by them. This communication must be provided in writing (which can include being sent by email) and must be specific to the individual.
The duty is on you as the employer to provide the right information to the right individual, at the right time.
5. Automatically enrol your eligible job holders
There is a process that you will need to follow in order to make an eligible jobholder a member of an automatic enrolment pension scheme.
Certain information about your eligible jobholders will also need to be supplied to pension scheme managers for example at specific points in the process.
6. Register with The Pensions Regulator and Keep records
You are required to inform The Pension Regulator how you have fulfilled your new automatic enrolment duties by registering this information online shortly after your staging date. You will also need to maintain specified records about enrolled workers, their status within the scheme, the payment of contributions and the qualifying scheme itself.
7. Contribute to your workers’ pensions
Starting on your staging date, you must contribute to your chosen pension scheme on behalf of your workers.
The minimum contribution rates that an employer must pay into their workers’ pension scheme will be introduced gradually over a 6 year period (from 2012 to 2018). This is known as ‘phasing’. The minimum overall contribution will be 2% rising to 8%. Where your employee doesn’t contribute towards the pension, the employer will be expected to contribute the full minimum amount.
Phasing will apply to most, though not all, types of pension scheme (your scheme provider will be able to tell you if phasing applies to you).
Further Information about Auto Enrolment
At Qtac Payroll we are committed to ensuring that our customers are aware of, and fully compliant with, any changes to legislation that will impact on their payroll requirements as soon as possible.
We have therefore been working on Auto Enrolment since it’s inception and have produced a free Guide to help employers understand the implications for their business.
Download the Guide – An Introduction to Auto Enrolment – Workplace Pensions.
The implementation and administration of auto enrolment is also going to create considerable additional work for businesses, something you may have not yet fully appreciated.
Read out recent post about the additional administration that your businesses will need to have in place here.
Alternatively, for more information and help with Auto Enrolment contact the team at Qtac on 0117 9353500.
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