If you employ staff and pay them a salary you need to understand if they need to be automatically enrolled into a workplace pension scheme.
If they meet the criteria where they must be enrolled, you must automatically enrol them without giving them the option. If your staff don’t need to be enrolled automatically they may have the right to opt in or join. If any member of staff has to or wishes to join, you will need to setup and run a workplace pension.
You may make contributions into your employees’ personal pension schemes. Unfortunately this doesn’t avoid automatic enrolment – you’ll still need a qualifying workplace pension scheme, have to enrol your staff and make 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 or £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 needs to be automatically enrolled you will need to setup a workplace pension scheme. If they have the right to opt in and they choose to, you will also need to setup a scheme.
Actions you need to take before your Staging Date
- Identify any employees that require automatic enrolment; if you have any, you’ll need to set up a scheme for the Staging Date.
- Identify any employees that have a right to opt into a scheme. If any are eligible, you need to formally ask them if they would like to enrol in a workplace pension and record their response. If any eligible workers wish to opt into a scheme, you are required to provide one. You should provide eligible employees with information about automatic enrolment to raise their awareness. If you have eligible employees for automatic enrolment, or wish to opt in on your staging date, they must be enrolled into your workplace pension by the staging date.
Understand your costs
You’ll need to make minimum regular contributions into your workplace pension scheme for any employees that must be automatically enrolled or exercise their right to opt in. The table below provides an overview however the rules around contributions must consider many other factors that you can read about on The Pensions Regulator website.
|Contribution date||Employer minimum contribution||Employee minimum contribution||Total minimum contribution|
|Before April 18||1%||1%||2%|
|April 2018 – March 2019||2%||3%||5%|
|April 2019 onwards||3%||5%||8%|
There may also be other costs to consider, such as setting up your scheme, accounting or payroll services, software to manage automatic enrolment and any independent advice you may require.
Planning for your staging date
If you need a pension scheme, start preparing at least nine months before your staging date. This is to ensure you have enough time to research, plan and setup your pension scheme. Many experts believe that many pension companies won’t be able to cope with the influx of new applicants so the sooner you start the less likely you are to be caught up in the rush. You don’t even need to wait for your letter, you can find your letter code and staging date on The Pensions Regulator website and begin to prepare now.
If you already have a pension scheme in place for your staff you’ll need to check with your current provider to see if it can be used for automatic enrolment.
It is important to understand which scheme is suitable for you and your staff. You’ll also need to check if it will work with the payroll software you use to run your business. The Pensions Regulator has provided useful information to help employers find and choose a pension scheme, which is useful to both employers that need to set up a scheme as well as those with an existing scheme to check that it is fit for purpose.
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.