You may employ a spouse or family member to help with your business. If they are paid a salary and they’re not a director, they may be an ‘eligible worker’ which means you may need to automatically enrol them into a pension scheme. If they are a director, there may still be enrolment duties.
It’s important to understand if anyone in your business needs to be enrolled automatically into a workplace pension. Keep in mind that a workplace pension will create a significant burden and costs for small business owners. If anyone does need to be enrolled or chooses to, it will be necessary to open a scheme, communicate with and assess workers, enrol them plus administer the scheme day to day including making contributions.
A worker that is eligible to join a workplace pension is an employee aged between 22 and the state pension age that is paid over £833 per month / £192 per week.
The criteria are:
|Weekly gross earnings||Monthly gross earnings||Age|
|16 – 21||22 – SPA||SPA – 74|
|£112 and below||£486 and below||Has a right to join a pension|
|Over £112 up to £192||Over £486 up to £833||Has a right to opt in|
|Over £192||Over £833||Has a right to opt in||Automatically enrol||Has a right to opt in|
If a worker earns over £833 per month or £192 per week they must be automatically enrolled in a workplace pension scheme. If they have the right to opt in and they choose to do so, this would also require you to setup a scheme.
Assessment of eligible workers
When your staging date arrives you need to assess your workers i.e. directors and employees paid via your PAYE scheme. This assessment includes you reviewing the status of all your employees and directors employed on your staging date and assessing if they need to be enrolled. If you have eligible workers on your staging date you will need to ensure that you have a workplace pension scheme in place and that all eligible workers are enrolled.
If you are both directors:
- automatic enrolment duties apply for both of you if you both have employment contracts however this does not automatically mean a pension needs to be setup.
- automatic enrolment duties won’t apply if only one of you has an employment contract or neither of you has.
If one of you is a director and the other is not:
- automatic enrolment duties apply for the person who isn’t a director however this does not automatically mean a pension needs to be setup.
- automatic enrolment duties for the person who is a director will apply if you both have contracts of employment.
It is therefore important to understand and assess in advance of your staging date the workers in your company. You then have the time to make changes if you wish or setup a workplace pension if you will need a scheme.
Actions to take before your staging date – start now
1. Understand your current status
If you employee family members that would currently be classed as eligible workers, you may decide to make changes or review their involvement in your company before your staging date. This may allow you to avoid creating the additional administrative burden of setting up and operating a workplace pension scheme.
If you are required to operate a workplace pension scheme you’ll need to start preparing at least 9 months before your staging date. This is to ensure that the scheme is operational and all eligible employees are enrolled by the Staging Date.
If you are a customer of inniAccounts you’ll be pleased to know we’ve created an automatic enrolment assessment tool to help you understand your current status. By completing the assessment you’ll be guided on the next steps and we’ll be able to help ensure you meet your duties as a registered employer.
2. Nominate a contact at The Pensions Regulator
If you have employees you are not exempt as an employer from Automatic Enrolment duties and have a legal responsibility for making sure your eligible staff are enrolled.
The Pensions Regulator need to be notified who is responsible for managing the automatic enrolment process on behalf of your organisation, even if you don’t expect to have to setup and operate a pension scheme. The Pensions Regulator is writing to every employer approximately 12 months before their staging date to let them know about their staging date and also to ask for a contact to be nominated.
Once a contact has been nominated, what you do next will depend on if you need to setup a workplace pension scheme.
If you need a workplace pension, you’ll need to decide which one you wish to operate. The Pensions Regulator has provided useful information to help employers find and choose a pension scheme.
If you don’t need or are planning to not operate a workplace pension, you need to make sure that before your staging date you have no one that needs to be automatically enrolled and check that no one will want to opt in. If anyone is eligible on your staging date, you will have no choice other than to open a pension scheme, even if your workers will opt out.
Declaration of compliance
If you don’t need to setup a pension scheme you’ll need to wait until your staging date. You then have to complete a declaration of compliance to The Pensions Regulator within five months of your staging date. This is a legal responsibility to let them know what you’ve done to meet your duties as an employer.
If you do need a scheme, you will need to set this up in advance of your staging date then complete a declaration of compliance to confirm to The Pensions Regulator you have met your duties.
Re-declaration every three years
As an employer operating a PAYE scheme, you have ongoing duties. You’ll need to complete the automatic enrolment process every three years once you’ve submitted your declaration. This is known as automatic re-enrolment; it ensures that businesses remain compliant.