Pension auto-enrolment –guide for business owners and employers

 

Auto enrolment applies to all employees in the UK but not all of them have to be enrolled automatically. After the employer’s duties come into force, all eligible staff members should be enrolled the first time they earn over the automatic enrolment threshold of £192 a week, £833 per month or £10,000 per year and the workers are aged between 22 and State pension age. Employers must send letters to eligible jobholders stating that they have been automatically enrolled and have the option to opt out within the opt-out period. 

 

Once an employee is enrolled they have a 30 day opt out period in which they may choose to opt out and get a full refund of all deductions made. Employers are required to continue automatically enrolling eligible workers who have opted out, every three years. 

 

Non-eligible jobholders who earn between the Lower Earnings Limit (LEL) currently £5,876 per year (£490 per month) and £10,000 (£833 per month) for the 2017-2018 tax year and are aged between 22 and State pension age have the right to opt in if the ask to be put into a pension scheme. The letters the employers send to non-eligible jobholder must state that they have the option to be enrolled, and that the employer must pay contributions if they choose to opt in. 

 

Entitled workers who earn less the LEL (currently £490 per month) and are aged at least 16 and under 75, are not automatically enrolled. They may ask to join the scheme, which is different to being enrolled. The employer is not required by law (but may if they wish) to make employer contributions to the scheme. The letters the employers send to entitled worker letters must state that they can choose to join the pension scheme. 

 

If a bonus is paid that takes the member of staff’s earnings over the automatic enrolment threshold amount for the pay period, they would need to be enrolled in that same week or month. 

 

 

A company’s staging date is the date they must begin to start the automatic enrolment process and offer a workplace pension scheme to employees. The staging date can be found by entering the employer PAYE number on the Pension Regulator website. 

 

Every employer is required to fill out a Declaration of Compliance within 5 months of their staging date. Employers are also required to continue automatically enrolling eligible workers who have opted out, every three years. 

 

 

If a director does not have an employment contract, they cannot be a worker and are therefore always exempt from automatic enrolment. Therefore, you will not have any automatic enrolment duties if the only people working for the company are directors, none of whom have an employment contract or only one of whom has an employment contract. This means that an organisation with one or more directors who do not have contracts of employment is not an employer if it does not have any staff other than the director(s). The company will have no automatic enrolment duties and does not need to complete a declaration of compliance. In this case they should notify the Pension Regulator that they are not an employer (because all their staff are exempt). 

 

However, Automatic enrolment will apply if more than one director has a contract of employment. 

 

 

The minimum contribution, which is currently 1% for both employers and employees, is set to rise to at least 3% for employers and 5% for employees by 2018. Once you deduct contributions from your employees pay, you are obliged to pass these payments on to your pension provider no later than the 22nd of the next month.