A new system is coming into place that requires all UK employers to provide a workplace pension scheme to all of their employees. The system is called Automatic Enrolment (AE) and if you have employees it is likely that you have received a letter from the Pension Regulator telling you when it will affect you.
Unfortunately, AE can be a complicated system that you are advised to begin preparing for a year in advance. This can be stressful for employers, especially when you are not sure where to look for advice.
How do I prepare and manage Automatic Enrolment?
The first thing you should do is decide on the type of pension you will use. Whilst it is an important step, you would soon realise that there are a multitude of administrative and compliance duties to deal with as well. You will need to contact all of your employees to let them know they are being enrolled and you will need to determine which employees must be enrolled and which can be enrolled if they wish.
Even when AE is up and running you’ll need to check with employees each pay period, which could be weekly, to see if they change their mind regarding being enrolled or not. This data needs to be kept for a minimum of six years as well, so it could take up a lot of space.
How do I know who has to be enrolled automatically and who doesn’t?
There are three types of employee as far as AE is concerned, these are Eligible Joiners, Non-Eligible Joiners and Entitled Workers.
Eligible Joiners are employees who are over 21 years old but below state pension age that earn over £10,000 per year in total or pro rata in the 2014/15 tax year. They have to be automatically enrolled into a workplace pension and receive employer contributions to their pension.
Non-Eligible Joiners are employees who earn between £5,772 and £10,000 per year in total or pro-rata. They do not have to be automatically enrolled into a workplace pension but must have the right to ask to be enrolled if they wish and receive employer pension contributions
Entitled Workers are any member of staff that earns less than £5,772 per year total or pro-rata. They need to be informed that they have access to the pension scheme, but will not necessarily get employer contributions to it.
It sounds very complicated and I still have a lot of questions
Unfortunately, as mentioned above, this is a big topic, too big to fit into one of our blogs. In addition, we are not experts with pensions or automatic enrolment.
If you do require more information or assistance with the above, or with payroll in general, please do not hesitate to contact us.