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Auto enrolment Part 1: what employers need to do

Posted on Tuesday, 7th October 2014 by

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The Pensions Regulator may already have sent you a letter to remind you about auto enrolment for your business.  Employers will need to enrol many of their employees into a work based pension scheme and pay some pension contributions, regardless of the size of the business.

Work out your “Staging Date”

The ‘staging date’ is set by reference to the number of persons in an employer’s PAYE scheme on 1 April 2012.  Large employers have already implemented auto enrolment, and those with less than 50 employees should expect a deadline between 1 June 2015 and 1 April 2017.

Check your staging date at the link here.

The basic steps

The key duties are to:

a)    assess the types of workers in the business

b)    provide a qualifying auto enrolment pension scheme for the relevant workers

c)    write to most of their workers explaining what auto enrolment into a workplace pension means for them

d)    automatically enrol all ‘eligible jobholders’ into the scheme and pay employer contributions

e)    register with The Pensions Regulator and keep records.

Who do you have to include?

A ‘worker’ is:

  1. an employee (this is the basic category – everyone on the payroll), and
  2. a person who has a contract to provide work or services personally and is not undertaking the work as part of their own business (this can include some agency workers or short term casual workers).

Once you have your list of worker you need to identify which of these are:

  1. eligible jobholders:
    • aged between 22 years and the State Pension age
    • earning over the ‘earnings trigger’. The annual trigger is currently £10,000 for 2014/15 which is the same amount as the PAYE tax threshold
    • working or ordinarily working in the UK
    • not already in a qualifying pension scheme.
  1.       ii.       non-eligible jobholders: this class of people can opt in to the scheme if they choose, and employer contributions would be payable
  2.      iii.       entitled workers: can also join the scheme, but the employer is not required to contribute

What do I need to tell my workers?

You are required to write to your workers explaining what auto enrolment into a workplace pension means for them.

There are different information requirements for each category of worker. For an eligible jobholder, the letter must include details of how the employee can opt out of the scheme if they wish. The letter must not, however, encourage the employee to opt out.

We can help you with this process if you aren’t sure.

Registration and records

An employer must register with The Pensions Regulator within five months of the staging date (or the last day of the postponement period(s) where postponement was used at staging).

An employer must also keep records which will enable them to prove that they have complied with their duties. Keeping accurate records makes good business sense because it can help an employer to:

  • avoid or resolve potential disputes with employees
  • help check or reconcile contributions made to the pension scheme.

Opting out

An eligible jobholder has the right to opt out of auto enrolment if they wish. This means they will not be required to pay pension contributions but they will lose the benefit of the employer paying pension contributions as well.  It is estimated that up to 15% of employees will opt out of the scheme.

Talk to our legal team

The information provided in all of our blogs reflects only a narrative of some elements to consider on the topic. The blogs do not contain considered legal advice and should not be relied upon as advice. Please see our website terms and conditions for full details of our disclaimer. If you are interested in obtaining advice, please contact one of our lawyers who will be happy and able to advise you on your own particular circumstances.

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Andrew Robinson - Employment Law
Andrew Robinson - Employment Law
andrew.robinson@ehlsolicitors.co.uk 01509 212 108
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