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What is auto-enrolment?

Auto enrolment is a compulsory process that every employer must follow to give their employees the opportunity to become a member of a qualifying workplace pension scheme.  Where membership is required by auto-enrolment, both the employer and employee must pay contributions at least to the minimum level.  However, it is possible for employees to opt out of joining the workplace pension and in this instance, neither the employer nor the employee is required to make a contribution.

The auto-enrolment process also applies to charities, other non profit making organisations and those who employ domestic staff such as a nanny or gardener.

Employers are legally required to tell their staff about the pension scheme your company will be using and allow other staff to join if they request to do so.

If you fail to comply with your duties then the Pensions Regulator may take enforcement action and issue a notice and or penalty, therefore we would recommend you plan in good time.

Planning for Auto-enrolment

It is essential that you allow plenty of time to prepare for auto-enrolment and we would recommend starting as early as 12 months before your staging date, although not all employers will require this much time.

We recommend that you find out your Company’s staging date and from there nominate someone in your business who will manage or implement auto-enrolment for you.

Please note that the responsibility for complying with the duties remains with the employing organisation and not the nominated contact.

As part of your preparations, you will need to involve key people in your planning, such as your Human Resources administrator, your payroll department and your accountant as they will be carrying out some of the day to day activities leading up to auto-enrolment and the ongoing process once up and running.

Approximately ten months before your staging date you must make a quick assessment of your employees to see if you have any staff that need to be automatically enrolled and if you do then you will need a pension scheme.  Below is a detailed list of how employees are categorised for auto-enrolment.

  • Worker – someone who works under a contract of employment.
  • Job holder – A worker who is aged between 16 and 74 and is working or ordinarily works in the UK under their contract and has qualifying earnings.
  • Eligible Jobholder – A jobholder who is aged between 22 and state pension age and has qualifying earnings above the earnings trigger for auto-enrolment
  • Non-eligible jobholder – A jobholder who is aged between 16 and 21 or state pension age and 74 and has qualifying earnings above the earnings trigger or is aged between 16 and 74 and has qualifying earnings below the trigger
  • Entitled Worker – A worker who is aged between 16 and 74 is working ordinarily in the UK under contract but does not have qualifying earnings.

Once you have accessed your employees you will need to make sure your Company’s software will support auto-enrolment, for example:-

  • Deducting and paying contributions to the scheme
  • Monitoring the ages and earnings of staff
  • Handling requests to join the scheme from members of your staff who haven’t been automatically enrolled.

If your quick assessment has identified that you have staff for automatic enrolment then you will need to think about choosing a Pension Scheme, should you not already have one in place.

One of your new duties as an employer is to write to each member of your staff telling them how auto-enrolment affects them, whether they have been auto-enrolled and we recommend you plan these communications before your staging date so you know who should be receiving what information.

You can postpone auto-enrolment for some or all of your staff for up to three months from staging and should you choose this option then you will need to communicate it to all staff.

Staging date and beyond

On your staging date or the last day of postponement, you will need to assess the ages and earning of all your employees.  This is to identify the duty you have for them and whether you need to auto-enrol them.  By this stage, you should have all the necessary systems in place to generate this information automatically.

As soon as you know who you need to auto-enrol, you will need to provide the scheme with the information they require to get their membership up and running.  If you have planned correctly you should already have identified what the information is.

You will be required to automatically enrol anyone who is eligible within six weeks of the staging date.  You must keep a record of all the members you have enrolled so that you can notify the Pension’s Regulator at declaration.

It is a legal requirement to complete and submit the “Declaration of Compliance” to the Pension’s Regulator within five months of your staging date.