A common question from clients employing staff is "What are my responsibilities regarding staff pensions and Auto Enrolment?"
So by way of a small refresher, one of our senior accounts team, Karen Humphrey, sets out the current legislation and what employers need to do to be compliant.
What is Automatic Enrolment?
Under the Pensions Act 2008, every employer in the UK must put certain staff into a workplace pension and pay into it. This is called 'automatic enrolment'.
If you are employing staff for the first time, your legal duties for automatic enrolment begin on the day your first employee starts work.
Who needs to be enrolled?
You must automatically enrol employees into a pension scheme and make contributions if all of the following apply:
The employee is :-
classed as a ‘worker’
Aged between 22 and state pension age
They earn at least £10,000 per year
They usually work in the UK
An employee can choose to ‘Opt in’ and if they do the employer must make contributions on their behalf if the following applies:
They earn over £520 a month
They earn over £120 a week
They earn over £480 over 4 weeks.
Are there any Exemptions
In some cases directors will be exempt from auto enrolment.
Can you delay enrolling employees?
There are three occasions when a postponement can be used, these are:
Staging postponement - The employer can delay their duty to assess and enrol their employees/workers for up to three months of their staging state (the PAYE Scheme being set up).
New employee postponement - The employer can delay enrolling a new employee for up to three months after the commencement of their employment. This will be useful for employers that have a lot of temporary workers.
Eligibility postponement - The employer can delay enrolling a worker when they first meet the criteria for up to three months.
What do we have to contribute?
The current contribution rates are:
Employees 5% of qualifying earnings
Employers 3% of qualifying earnings
The table below shows the lower and upper levels of qualifying earnings:
Ongoing duties
Once the scheme has been set up and the initial declaration of compliance has been completed you still have ongoing duties towards your staff.
These include:
Assessing any new staff to see if they meet the age and earnings criteria to be put into a pension scheme.
Monitor the ages and earnings of your every time you pay them to see if they need to be put a pension scheme.
After three years all employees need to be re-assessed and re-enrolled into the scheme (even if they have previously opted out), as before it will be up to the individual employee to opt out from the scheme
For more detailed guidance please contact karen@greenlineaccountants.com, while the full outline can be found at https://www.thepensionsregulator.gov.uk/en/document-library/automatic-enrolment-detailed-guidance
Karen Humphrey 23 July 2021