From when automatic enrolment started back in October 2012, more than 8.5 million people have been automatically enrolled in a workplace pension by nearly 800,000 employers. This figure is only set to increase as all new employers will have enrolled their staff by February 2018, and existing businesses reach their staging dates.

Here is how automatic enrolment will impact you:

New businesses

From October 2017, anyone thinking of taking on staff for the first time needs to be aware that they will have automatic enrolment responsibilities from Day 1.

Any new employer will need to assess their workforce on Day 1 and identify any eligible “workers” (i.e. individuals aged between 22 and 65 earning over £10k a year).  If they have any such workers they are required to set up, operate and contribute into a workplace pension scheme.  There are many auto-enrolment solution providers out there, including NEST (National Employment Savings Trust) which was specifically set up by the government to assist with employer’s obligations.

Within 5 months of taking on staff, employers must complete a declaration of compliance to tell The Pensions Regulator (TPR) what they have done to meet their duties.

Employers should be aware that failure to meet these time frames will only result in contributions being backdated to the date they first employed staff.  However, if an employer chooses to ignore their duties completely, TPR can use their powers to ensure compliance with an escalation of financial penalty notices.

On-going Duties

Automatic enrolment is not a one off-task! Employers must continue to assess staff every time they pay them and keep records to confirm compliance.

Also, every three years, employers must automatically re-enrol staff who initially opted out of their pension scheme AND they must complete a redeclaration of compliance within 5 months of the anniversary of the date their duties began.

Increases in Contributions

Currently, contributions are set at a minimum of 2% of pensionable earnings – meaning that the staff are required to pay in 1% and the employer matches it and also pays in 1%.

On 6 April 2018, these minimum contributions are set to increase.  Staff will be required to pay in a minimum of 3% and their employer is required to pay in a minimum of 2% – making a total contribution of 5%.

These contributions are set to rise again on 6 April 2019, when the minimum contribution will be a staff contribution of 5% and an employer contribution of 3% – making a total contribution of 8%.

These percentages are calculated on an employee’s pensionable earnings between £5,876 and £45,000 per year.

Compliance and Enforcement

TPR has stated that their “overall approach is to educate and enable you to comply with the legislation” so they are there to support you through this process.  However, if you are proved to be ignoring your duties, TPR will take action to ensure staff receive the pensions they are entitled to!

TPR will issue fines to non-compliant employers and, for those who remain non-compliant, they will consider prosecution.

Hive can help

The legislation has been around for a while now and we have been able to help several of our clients navigate the auto-enrolment minefield.  Probably most importantly, we’re able to point you in the direction of tried and tested auto-enrolment solution providers.

Also if we prepare your payroll, we will assess the employees, liaise directly with your pension provider and let you know the contributions required as part of our normal monthly procedures.

If we are your payroll provider and you’d like to find out more please call  01872 300232 or email us at hello@hivebusiness.co.uk.