Employers should now be well aware of the recent legislative changes that require companies to automatically enrol qualifying staff into a workplace pension scheme. A huge number of small UK businesses will have to factor this into their short-term plans and ensure that they meet the appropriate deadline for stepping into line with staff pensions. In order to help things run smoothly we’ve put together a list of our top ten tips for automatic enrolment.
1. Follow the written instructions
To help ensure there are no nasty surprises, The Pensions Regulator (TPR) will be writing to all employers well in advance of their business’ staging date. The staging date they provide in this letter will be the date that employers become legally responsible for ensuring their staff are enrolled correctly. If things remain unclear or you are unsure what to do, visit the TPR website or contact The Financial Management Centre – we’ll be happy to clarify any concerns.
2. Know your staff
Different criteria apply to different staff when it comes to automatic enrolment, so it’s important to double-check the personal details of your workforce. There are 3 categories; eligible jobholders, non-eligible jobholders and entitled workers. You must provide an automatic enrolment pension scheme for staff aged between twenty-two years and state pension age who earn in excess of £192 per week or £833 per month. Employers are obliged to contribute to the pensions of staff in this bracket who are known as eligible jobholders.
Staff earning below £5,824 per year (entitled workers) have the right to join a pension scheme but are not entitled to employers’ contributions.
Employees classed as non-eligible jobholders can opt to join and receive employer’s contributions. These employees earn between £5,824 and £10,000 per year.
3. Act now
The hectic nature of business means the temptation to procrastinate is always there; however, the financial penalties of failing to meet your obligations when it comes to automatic enrolment mean staying ahead of the game is essential. We’d recommend starting to prepare no later than six months ahead of your staging date to make sure things run smoothly. A failure to adhere to the terms set out will lead to an initial fine of £400 followed by daily penalties of anything between £50 and £1,000.
4. Plan for the future
Automatic enrolment will inevitably impact on your budgeting. With set-up charges and regular contributions to account for, now is a good time to think ahead and consider the implications of pay rises and staffing numbers.
5. Clarify your status
If you happen to be contacted by TPR but do not actually have any staff working for you, it remains your responsibility to clarify your status.
This can be done by completing this form https://automation.thepensionsregulator.gov.uk/notanemployer
6. Communicate the changes
Employers are legally obliged to communicate details of automatic enrolment to all staff between the age of sixteen and seventy-five. This does not only apply to staff eligible for automatic enrolment but also to those who may wish to voluntarily join your pension scheme. Not only is this a legal requirement, it will also reassure staff and make sure they are well aware of these important changes.
7. Staff registration
All eligible staff must be registered so TPR can monitor the effectiveness of the new regime. In theory this will help protect employees and support employers as the changes are rolled out. Registration must be completed within four months of your staging date.
8. Why wait?
If your business is well prepared and you want to get the ball rolling quickly, it is possible to bring your staging date forward in order to begin participating sooner. To do this, TPR will need at least one month notice prior to your proposed new staging date. Your pension scheme must also be set up and aware that you plan on starting early.
9. Last minute questions?
Now is the time to double check that all the boxes have been ticked and that you have met your obligations. With punitive financial penalties awaiting those who have not complied, we would always recommend getting a second opinion if you have any niggling doubts. At The Financial Management Centre, we are well versed in assisting with automatic enrolment and the challenges it can bring, so contact us if you’d like us to help make sure you’re good to go.
10. All set
Now everything’s finalised and you, your staff and TPR all know where things stand, all that’s left to do is adjust your payroll. If this is managed in-house, it’s worth looking into additional training for your payroll clerk and ensuring your payroll software is capable of dealing with automatic enrolment.
If your payroll is outsourced, be sure to liaise with your provider to clarify the changes. They should be well aware of what automatic enrolment entails and will ensure everything runs smoothly from there on in!