Automatic Enrolment – the basics!
In accordance with the Pensions Act 2008, the law on workplace pensions has changed, every employer in the UK must enrol certain employees into a company pension and contribute towards it. This is called “automatic enrolment”.
If you employ at least one person you are an employer and you have certain legal duties. Not everyone has to enrol, there are certain criteria, read on and things may become clearer.
If you are an employer with a PAYE scheme then your staging date was set in law as of 1st April 2012, you can find out when you need to have your Automatic Enrolment in place by inputting your PAYE Reference here. If you don’t pay your staff through a PAYE scheme, then your staging date is 1st April 2017.
The employer contribution is made based on the employees Pensionable Salary, which is currently any earnings between £5,824 and £43,000. The initial contribution is 1% employer contribution and 1% employee contribution.
|Date||Total minimum contribution||Employer minimum contribution|
|Before *05/04/2018||2% (including 1% staff contribution)||1%|
|*06/04/2018 – 05/04/2019||5% (including 3% staff contribution)||2%|
|*06/04/2019 onwards||8% (including 5% staff contribution)||3%|
*The proposed dates are subject to Parliament approval
There are other costs associated with setting up a Company Pension scheme, which include implementation costs for your business or administration charges for the Pension scheme. These initial costs can range from £0 – £500. The Government Pensions Regulator has information on Understanding your costs, which is a good guide.
The Pensions Regulator enforces the law on workplace pensions but they also provide information and guidance to help employers meet their duties.
The duties employers have will depend on their own circumstances as an employer and those of their staff. To understand what you, as an employer, need to do, use the Pensions Regulator’s online ‘Duties Checker‘ which will guide you through a set of simple questions to determine what your specific duties are and when they need to be completed.
What happens if an employer doesn’t comply?
• The responsibility for complying with the employer duties rests with the employer.
• If you don’t comply, you will face enforcement action in line with the Pension Regulator’s risk-based approach.
• Enforcement action starts with statutory notices and is followed by penalty notices. Further non compliance may result in court action.
The Pension Regulator’s overall approach
They recognise that most employers will want to do the right thing for their staff. Their overall approach is to educate and enable employers to comply with the legislation. This puts the employer in a position to make the right choices and decisions. However, the responsibility for complying will rest with the employer.
The Pensions Regulator will promote good compliance behaviour among employers by ensuring that the legislation is being applied fairly.
In cases where an employer hasn’t understood their duties or have been unable to comply, the Pensions Regulator will work with the employer to get them compliant.
But if the employer has chosen to ignore their duties, the Pensions Regulator will use their powers where necessary to ensure compliance.
Those who do not comply will face enforcement action in line with the Pension Regulator’s risk-based approach.
The Automatic Enrolment is to ensure that when this generation of workers decide to retire, they have been able to make some provision for their pension with the help from their employers. Many will find that once they start a pension they will feel encouraged to add more to it, if they are able, so they will have an income for their retirement.
If you would like assistance with this or any other HR process, please contact Sally or Sarah on firstname.lastname@example.org