Auto Enrolment Guide
Get Sorted Ahead of Your Auto Enrolment Staging Date
01 April 2016 08:57
Do you employ staff? You're sure to have heard of Auto Enrolment by now. But what does it mean for you? Auto Enrolment will affect every single employer in the UK and most of their staff. So it's vital that you have an understanding. If you fail to comply you’ll face fines and even prosecution.
We've put together this step-by-step guide so you won’t have to fret about Auto Enrolment any longer.
First things first
Find out your 'Staging Date'
Each employer has a 'Staging Date'. This is the date you’re expected to take on auto enrolment. You can find out your staging date by entering your PAYE reference here. You’ll also get information through from The Pensions Regulator as your staging date approaches.
Choose a Pension Provider
When choosing a pension scheme for automatic enrolment you must make sure it meets certain criteria. You should look for a good quality scheme that offers value for money and protects your staff’s retirement savings. There are many providers offering pension schemes suitable for auto enrolment, including the Government’s own backed scheme “NEST”.
We recommend that you begin the process of selecting a pension provider well in advance of your staging date.
We are not authorised to give pension advice. Though we will certainly recommend a Financial Adviser who would be happy to discuss your options. The Pensions Regulator guide 'How to choose a pension scheme' is a good starting point. It should be noted that NEST is one provider that must accept your scheme.
From Your Stading Date Onwards
Assess workers and enrol them into the pension scheme
The table below shows you which employees must be enrolled into a pension scheme. Some employees must be 'automatically enrolled' at the staging date. Others may have the right to 'opt-in' or 'join' the scheme. An employer’s duty to each employee is determined by their age and level of earnings. You’ll need to perform an assessment in order to work out which employees fit into which category.
* Earnings levels are for the 2015-16 tax year
Employees under 16 or over 75 are excluded from the auto enrolment process.
'Eligible Jobholders' - employees between 22 and State Pension Age earning the equivalent of £10,000 or more per annum. If you have employees in this category, they must be automatically enrolled into the pension scheme. You, as the employer, must pay contributions into these employees’ pension scheme.
'Non-eligible Jobholders' - two types of employee fall under this category:
1). Employees aged between 22 and State Pension Age earning between £5,824 and £10,000 per annum (i.e. their earnings are below the £10,000 'trigger' for auto enrolment).
2). Employees earning above £5,824 that are either below or above the age of automatic enrolment (so, aged 16-21 or above state pension age). Employees in this category are not automatically enrolled but have the right to 'opt-in' to the pension scheme if they choose. If they do choose to 'opt-in' then you must pay contributions into the scheme.
'Entitled Workers' are those employees aged between 16 and 75 earning below £5,824 per annum. Employees in this category must be offered the opportunity to join a workplace pension scheme. Though, you’re not obliged to make contributions to it.
Calculate and deduct the pension contributions
The amount you must contribute to the pension scheme depends upon your particular scheme’s rules. However, there are minimum contributions you must pay.
These are shown in the table below:
You can see that minimum contributions will be increased gradually over time.
Some pension schemes calculate pension deductions based on all pensionable pay. Others use a particular band of their pay known as 'qualifying earnings' (for 2015-16 earnings between £5,824 and £42,385 per annum).
Make sure your staff know
You must write to each member of staff to tell them how automatic enrolment affects them and inform them of their rights. This is a legal requirement. Following your staging date, you should give 'Eligible Jobholders' information about their contributions and their right to 'opt-out' of the scheme.
'Non-Eligible Jobholders' must be informed of their right to 'Opt-in' to the scheme, and so on.
Some bigger pension providers will handle these employee communications for you. They will send the relevant letters/emails to your employees at the correct times. Others provide letter templates which you can adapt to your own needs.
Complete the automatic enrolment Declaration Of Compliance ('Registration')
You must provide information to the Pensions Regulator to confirm your compliance with automatic enrolment duties. You must complete your declaration of compliance even if you don’t have any staff to automatically enroll.
Declaration is mandatory and you face fines if you don’t do it in time. Your declaration deadline is five calendar months after your staging date. We suggest doing it sooner rather than later, to avoid any complications. Declaration provides a snapshot of your workforce on your staging date and you’ll need to account for each person.
Your declaration is submitted using the online government gateway, so you’ll need to register for an account.
Continually assess your workforce before each pay date
Unfortunately, once the scheme has been set up your duties don’t end there. You have to keep making contributions in accordance with the minimum limits you agreed to. In addition to this, you have to keep assessing your workforce before each pay day following your staging date. You’ll need to monitor any changes in the age and earnings of your staff. You may have taken on a new employee who needs to be automatically enrolled, or perhaps one of your existing employees has reached auto enrolment age or has received a pay rise and so becomes an 'Eligible Jobholder'.
The auto enrolment 'assessment' process will become part of your regular payroll routine.
Need a bit more help?
We’ve already assisted and set up schemes for clients, making sure they meet all requirements.
So we’re well-equipped to help you make sense of Auto Enrolment.
Want pointed in the direction of a financial adviser for pension advice? Want us to take away the burden of monitoring your payroll? Or just need a bit more help to understand? Whatever your Auto Enrolment query, MoynanSmith are happy to help. Get in touch with us today, or give us a call on 01228 586790 for a quicker response.
Or why not pop in for a chat over coffee?
Want a smooth transition to auto enrolment? Take a look at our Auto Enrolment services to find out how simple things could be.