Auto – Enrolment Traps To Look Out For

Auto enrolment has been gradually phased in by The Pensions Regulator. However, from 1 October 2017, first time employers will need to comply with the legislation immediately.

It’s essential that these employers understand their legal obligation and discharge them. If they failed to do so, fines will be imposed at a rate of up to £10,000 per day.

If you are a new employer, it is worth having someone review your position at regular intervals even though you know that you are compliant.

The Opt-out Trap

It is possible that your staff might not be interested in a pension agreement. Even if this is common amongst employees, this can cause problems as auto-enrolment works on a strictly “opt-out” basis. Most employers with staff that are not interested to enrol in a scheme often fail set-up one but fail to enrol anyone in it.

It’s important that employers know that they have to enrol workers to allow them to opt out. If you are a new employer, you must review your workers to see if they are eligible or have the right to join/opt out in to a scheme. You must send each of them a letter stating their auto-enrolment rights and these must be sent out within six months. Your scheme must also be se up in this timescale.

When a scheme is set up and employees opt-out correctly, they would still need to be enrolled again in a three-year cycle where they can decide to opt-on or opt-out again.

You will also need to budget that from 6 April 2018, employer’s total contribution rises to 3% and employee’s contribution rises to 5%.

Director-only Companies

The auto-enrolment rules do not include companies with only one director or where there are multiple directors but no more than one of them has a contract of employment.

If you are in this position, you might still receive a letter stating that you have auto-enrolment duties and if you have, you can just simply notify The Pensions Regulator that there are no qualifying workers.

Seasonal Staff

Auto-enrolment applies to temporary staff taken over Christmas and the New Year. If you have employers who won’t be working for than three months, you can use postponement. If you do this, you will still need to write to your employees explaining the postponement within six weeks from the date postponement starts.

If you have any more queries or require more information, please don’t hesitate to contact our office at 01772 788200 or email us at