Payroll

Auto-enrolment

All employers with staff prior to October 1st 2017 have been given a staging date from which there auto enrolment duties start. From October 1st 2017, anyone taking on staff for the first time will have auto enrolment duties from the contracted start date of their first worker, known as the duties start date.

The employer must:

a) Automatically enrol in to a workplace pension scheme and make employer contributions for all staff who are Eligible Job Holders, i.e.

Work, or ordinarily work, in the UK

Aged between 22 and state pension age

Earn above the earnings threshold, currently £10,000

There is an option to postpone enrolling some or all employees for a maximum of three months.

If there are no eligible job holders then an employer doesn’t have to set up a pension scheme. However, other employees can ask to opt in or join a pension (see below) and then a scheme must be set up.

b) Enrol other staff who have the right to opt in or join a pension scheme

i) Non-Eligible Job Holders can ask to be enrolled and the employer must make contributions. Non eligible job holders are workers who:

Work, or ordinarily work, in the UK

Are aged between 16 and 74

Earn between the lower level of earnings and the earnings threshold, currently £5,876 –  £10,000

OR

Work, or ordinarily work, in the UK

Earn above the earnings threshold, currently £10,000, and are under 22

Earn above the lower level of earnings, currently £5,876, and are over state pension age

ii) Entitled Workers can ask to join a pension scheme, but there is no obligation for the employer to make contributions to the scheme. Entitled workers are those who:

Work, or ordinarily work, in the UK

Are aged between 16 and 74

Earn the lower level of earnings, currently £5,876, or less

c) Communicate all the steps in the process to their staff

Write letters to all workers explaining their rights and entitlements depending on the type of worker they are.

Write to any postponed employees

Write to workers already in an existing pension scheme to let them know they are not affected.

d) Manage opt outs and refund contributions already made by any employee who has requested to opt out within the 30 day opt-out period.

Opt outs last for three years

An employer must not encourage an employee to opt out of the pension scheme

e) Complete a Declaration of Compliance within five months of their duties start

There is a fixed penalty of £400 for failing to complete on time.

f) Keep records for a minimum of six years.

g) Make employee deductions and employer contributions

The current minimum total contribution is 2%, with 1% minimum from the employer

From April 6th 2018 the minimum total contribution will go up to 5%, with 2% being the minimum from the employer

From April 6th 2019 the minimum total contribution will go up to 8%, with 3% being the minimum from the employer

h) Submit a contribution file to the pension provider after each pay period and pay employees deductions by the 22nd of the next month.

i) Monitor employees for changes to their worker category – age or earnings.

j) Assess new employees and communicate with them according to their worker category

k) Re-assess staff every three years, re-enrol opted out workers and complete a re-declaration of compliance.

Work out your duties on The Pensions Regulator website.

If you would like any advice about auto-enrolment, or require help with your payroll, please contact me for a free, no obligation consultation.