Ayres Vause

Auto Enrolment – Is Your Business Ready?

Auto-enrolment is arguably one of the biggest changes to face businesses of all sizes in recent years. We have created the following guide to help you understand auto-enrolment and work place pensions better and get to grips with what it means for you as an employer.

What is auto-enrolment?

With an ageing population and dwindling pension pots, the government announced in 2012 that all work places with employees must provide a work place pension. Now, the roll out wasn’t immediate, with large companies leading the charge and smaller companies allowed a few more years to get their plans in place. But, by 2018, it will be a legal requirement that all businesses have auto-enrolled their employees and are paying into pension pots for them.

Who is eligible?

There are several criteria that rule you out of auto-enrolment, but the majority of employed workers are eligible. The criteria to be enrolled include:

This is a good general guide, but not the be all and end all of eligibility. It is worth noting that other employees are also eligible to join the pension scheme. See below:

Monthly earnings 16-21 yrs old 22 years old – State Pension Age State Pension Age to 74 yrs old
£481 and below Right to join a pension scheme Right to join a pension scheme Right to join a pension scheme
£481 – £833 The right to opt in The right to opt in The right to opt in
Over £833 Right to opt in Automatically enrolled Right to opt in
Directors or self-employed Cannot opt in Cannot opt in Cannot opt in

What if my employee is eligible but doesn’t want to be enrolled?

Unfortunately, the system is set up so that everyone is enrolled to start with. After this enrolment, your employee then has the option to opt out retrospectively. They will receive a one month ‘Opt out’ window in which to make their preference known. It is important to let your employees know that they cannot opt out before or after this window and if they do, a refund on contributions is up to the scheme provider. Although this is an inconvenience for employers and employees, it is designed to protect them from any pressure or coercion not to enrol in the scheme.

How do my employees become enrolled?

Despite the name, the process isn’t automatic, for you at least. There is a fair amount of work to be carried out by businesses to register all eligible workers and beyond. If you do not employ any eligible workers, it is also worth noting that you need to declare this via the Duties Checker here.

The following is a rough guide to the steps you need to put in place:

  1. Find your staging date – every employer will have one and it is simple to find by going here and putting in your PAYE reference.
  2. Determine which if any employees are eligible for enrolment. If none are eligible, click the link above and let the Pensions Regulator know.
  3. Around one year before the staging date, it is best practice to elect a contact for the Pensions Regulator in your organisation, giving them one point of contact for all-important correspondence.
  4. Planning is key and a robust action plan will be your best friend in the transition to auto-enrolment. Ideally this will be created a year in advance of your staging date. The Pensions Regulator website has a number of online tools to help create this plan.
  5. Choose your pension provider, be that private or the government’s pension scheme NEST. The sooner you do this the better, to avoid joining a long queue of other employers.
  6. Complete a declaration of compliance with the regulator NO LATER than five months before your staging date.
  7. During this time it is key to communicate with all employees, keeping them up to date on the process and what it means for them.

How will auto-enrolment affect me as an employer?

There is plenty to think about, especially the logistics of what is really involved, beyond enrolment. This table gives a good guide to what you can expect, but is by no means complete and each business and employee must be treated individually.

Employee type What you as an employer have to do
Eligible workers who MUST enrol •  Provide key information and communicate with the employee.

•  Auto-enrolment of employee

•  Upkeep of ongoing contributions

•  Process any opt outs

•  Automatically re-enrol every three years

•  Keep thorough records and personal data form the enrolment process

Non-eligible workers (those who can opt in to a pension scheme) •  Provide key information and communicate with the employee.

•  Auto-enrolment of employee

•  Pay contributions to chosen scheme

•  Process any opt outs

•  Keep thorough records and personal data form the enrolment process

Entitled workers (have the right to join a pension scheme) •  Provide key information and communicate with the employee.

•  Arrange pension scheme is necessary

•  Provide payroll deduction facility for employee contributions

•  You as an employer do not have to make contributions

•  Keep thorough records and personal data form the enrolment process

What is it going to cost me?

So we know what is involved and how to set up a work place pension with auto-enrolment, but you are probably wondering just how much this is all going to cost you? Well, it is all dependant on the employee and their salary, but a good guide in percentages below will help you work out the true cost.

Date Employer min contribution Total min contribution
Prior to 30-09-2017 1% 2%
01-10-17 to 30-09-18 2% 5%
01-10-18 and onwards 3% 8%

What next?

The roll out has started and the impact is already being felt. What we have learned so far is that timing, preparation and having all the facts is key to the successful implementation of auto-enrolment in any business. Good luck with your implementation and get in touch if you have nay questions or concerns.

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