Auto enrolment and workplace pensions

Relatively new legislation means that every employer has the obligation to enable their employees to contribute to their own pension fund. Each employer must comply with the legislation from a date based on their PAYE reference. Many larger companies have already reached their own date and, as time passes, it will be the turn of small businesses to comply. A general guide to your obligations follows:

You must be ready to enrol staff into your workplace pension scheme with effect from your "staging date". You can find out your own staging date by visiting the following website and typing in your PAYE reference number:

http://www.thepensionsregulator.gov.uk/employers/tools/staging-date.aspx

However, before you enrol staff into the scheme, there is a massive amount of preparation required. You must:

1. Identify your members of staff who are eligible to join the scheme and especially those that you are automatically required to enrol unless they exercise their right to opt out. It is against the law to take any action to induce anyone to opt out.

2. You will need to ensure that your payroll software is specifically tailored to automatic enrolment and will help you keep track of the ages and earnings of all your staff, telling you what you need to do for each of them.

3. You must set up a pension scheme that complies with the automatic enrolment legislation. If you already have an existing scheme for your workforce you should check with your pension provider to see if you can use it for automatic enrolment. If you need to open a new scheme, you must set it up in good time so that you can make contributions from your staging date. There will be thousands of small employers with the later staging dates which we believe will put scheme providers under enormous pressure and will almost certainly lead to late registration for a large number of employers. They will all be liable for late registration penalties.

4. You must write to your staff, advising how automatic enrolment affects them.

5. You must complete a declaration of compliance on the Government Gateway website that confirms that you have fulfilled all of your legal duties.

6. Once set up, on each pay run you must make the appropriate deductions from employees pay, calculate the employer's contribution and remit the funds to the chosen pension provider.

Automatic enrolment imposes significant ongoing duties on the employer. It is necessary to check, every payday, to see whether any of the members of staff who weren't automatically enrolled previously are now entitled to be put into the pension scheme (for example if they have reached their 22nd birthday).

After you have automatically enrolled your staff members, they may ask to "opt out" of the pension scheme. You must then stop deductions of contributions and, if the opt out was within one month of the automatic enrolment, arrange a refund of any contributions they have paid to date.

Certain staff who are not automatically enrolled may be entitled to and may ask to join the scheme and will need to be processed through the payroll.

We believe the specific areas that will require significant input and lead to increased costs are:

1. Identifying a scheme provider and setting up the scheme. We understand that the amount of information required by scheme providers is significant.

2. Dealing with employees immediately after they are automatically enrolled in a pension scheme. We believe this will come as a surprise to many of them and they may, on suffering deduction of their contributions, ask to opt out. Refunds will then have to be arranged.

3. Updating your payroll software if you choose to continue to process your payroll yourself. In particular, we believe the submitting of electronic information to the pension provider is likely to prove onerous.

As an employer you will be required to contribute to the employees’ pension fund. Minimum contributions start at 1% rising to 2% from 1 October 2017 and to 3% from 1 October 2018 onwards.

It may be that you wish to deal with all of your automatic enrolment obligations yourself. However, if you would like us to help you, we can provide some or all of the following services:

1. Assist with the setting up of an employer pension fund.

2. Help you to communicate with your employees and, if necessary, provide you with template letters.

3. Process your payroll on an ongoing basis.

4. Deal with your automatic enrolment compliance matters arising from the payroll we process, advising you on contributions to be remitted, employees who must join the scheme and other such matters.

If you would like us to help you with some or all of the tasks you are required to undertake, please contact us.

 

 

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