What is Automatic Enrolment?
Automatic Enrolment or ‘Auto Enrolment’ is a requirement for employers to enrol most of their workforce into and to contribute to, a qualifying workplace pension scheme.
Unless employees opt-out, both the employer and the employee must pay contributions into the scheme.
The Pensions Commission (2004) was established as a result of Government concerns over:
- The ageing population in the UK
- Individuals not saving enough to provide an adequate retirement income
Based on the recommendations of the Commission, the Pensions Act (2008), (2011) established a duty on employers to provide an occupational pension scheme. Auto enrolment means that, rather than having to actively choose to join a pension scheme, staff are put into one by their employer automatically. If the employee doesn’t want to be in the pension scheme, they must actively choose to opt out.
Employers have to automatically enrol workers who
- Are not already in a qualifying workplace pension scheme
- Are at least 22 years old
- Are below state pension age
- Earn more than the minimum earnings threshold (£10,000 in 2014/2015)
- Work or ordinarily work in the UK (under their contract).
- Additionally, there are other types of worker who have a ‘right to opt in’ if they wish.
When must I Comply with Auto Enrolment by?
Your start date or staging date is determined by the number of employees at 5 April 2012. Auto enrolment is being staged in over a period of six years, which started with the largest employers in 2012. Employers with less than 250 employees don’t have to enrol until 1 April 2014 at the earliest, if you have less than 250 employees and want to find out your exact staging date, use the link below:
However, you will need to start preparing for auto enrolment at least 12 months before your staging date.
Doing nothing is NOT an option; the Pensions Regulator has enforcement powers ranging from fines to court action for wilful failure to comply.
What are the Costs of Auto Enrolment?
- Employer contributions initially 1% rising to 3 % of employee qualifying earnings each year
- Assessing your employees as different ‘types of worker’
- Which pension scheme? Can you use an existing scheme?
- Communicating with your employees
- Enrolling employees
- Calculating pension contributions
- Administering auto enrolment, including submitting data to your pension provider and the Pensions Regulator
- Processing employee ‘opt out’s’
- You may also want to consider the cost of providing pensions which are competitive within your sector or with your competitors
- Software costs
One Person Companies
If you are the director of your company and have no other employees, then the company is not subject to the employer duties for Auto Enrolment.
How We Can Help
We run a fully RTI payroll service in house – we don’t outsource to a payroll bureau – that way you can be fully assured of receiving the same high quality service. Many employers will be looking for guidance on how to proceed with planning, meeting the staging date on time and also running the Auto Enrolment deductions and payroll once it is operational. We will be happy to discuss your Auto Enrolment needs with you.