AUTO ENROLMENT EMPLOYER DUTIES – WORKPLACE PENSIONS

WHY?
The Government have introduced a new pension law to get more people saving for their future. The auto enrolment employer duties are being introduced over 6 years, starting with the UK’s largest companies from October 2012.

As an employer, you will have new duties in relation to everyone working for you who are aged between 16 and 74; who works in the UK and for whom you deduct tax and NIC from their wages. Most employers will have to choose and contribute to a workplace pension scheme suitable for auto enrolment which must meet quality standards. Employers will have to auto enrol some workers into a workplace pension scheme and give others the option to join. The employer duties are not optional. The Pensions Regulator (TPR) will ensure employers comply or face hefty fines or even imprisonment!

WHEN?
Auto enrolment employer duties are being introduced in stages from October 2012. Employers need to establish their auto enrolment ‘Staging Date’ to determine when their auto enrolment employer duties first apply. Your staging date is determined by the size of your employer’s PAYE scheme based on the number of employees derived from information held by HMRC on 1 April 2012. The Pension Regulator will be writing to all employers 18 months before their staging date but you can also find your auto enrolment staging date here. You will need your PAYE reference number.  

Once you know your staging date you must allow plenty of time to prepare for auto enrolment and create a plan. The Pension Regulator recommends starting 12-18 months before your staging date. All employers must register with The Pension Regulator within 4 months of their staging date, even if they have no employer duties for their staff.

WHO?

Employers must assess their workforce to determine whether they’re to be treated as a ‘worker’. Initially this assessment is required on the staging date, but your auto enrolment employer duties don’t just stop once you’ve enrolled all your staff – they become part of your business as usual. You must assess your workforce regularly, ideally before each payroll run in order to assess all new joiners or a change of worker category. Workers fall into 3 categories:-

Eligible jobholder: * Aged between 22 and state pension age * Annual earnings between £10,000 and £42,384 * Must auto enrol.

Non-eligible jobholder: * Aged between 16 and 75 * Annual earnings above £5,824 * Has a right to opt-in to auto enrolment and employers must contribute.

Entitled worker: * Aged between 16 and 75 * Annual earnings less than £5,824 * Has a right to join auto enrolment but employers do not have to contribute.

Employers can choose to bring forward their staging date provided the Regulator is informed but cannot choose a later date.

We suggest that you choose your own Pension Provider. They have to be authorised by the Government. Examples of approved auto enrolment pension providers are NEST, NOW, Friendly Pensions, Scottish Life, Scottish Widows. See our auto enrolment pricing page for a full list of currently acceptable auto enrolment providers.

Highland Payroll Services can help guide you through the auto enrolment employer duties requirements.  For our pricing click here. Please contact us to discuss.

Below is a brief overview of the employers duties for auto enrolment and what employers have to do:-

1. Auto enrol certain workers into a pension scheme.
2. Make contributions on their workers behalf.
3. Register with The Pension Regulator.
4. Provide workers with certain information about the changes and how they will affect them.
5. Managing Opt Outs.

You need to identify which workers need to be auto enrolled. These are called ‘eligible jobholders’.

An eligible jobholder is:-

• Aged between 22 and state pension age.
• Working or ordinarily working in the UK.
• Earning above a certain amount – £10,000 (this will change each year).

All employers will have to register with the regulator who have one or more employee’s.

The rules of the scheme must require the employer to pay an overall minimum contribution of at least 8% of the worker’s qualifying earnings, of which at least 3% of this contribution must be from the employer. In most cases, Government tax relief will account for 1% of the total 8%. At present it is 1% for employee and 1% for employer as a minimum. By 2017 it will be 4% and 3%.

Employers who already have a pension scheme can confirm that it is suitable for auto enrolment by a process called ‘certification’.

Workers who have been auto enrolled have the right to opt out of the employer’s pension scheme. There is an opt out period of 1 month, where any deductions made from their salary will be refunded. Equally, any contributions the employer has made must be refunded to the employer by the pension scheme.

The worker can choose to cease membership at any time, although they may not be entitled to a cash refund of contributions after the end of the 1-month opt-out period. To opt out, workers must give notice via a document called an ‘opt-out notice’ to the employer. These notices will be available from the pension scheme provider.

Some workers are entitled to ‘opt in’ but there is no requirement on the employer to make employer contributions in respect of these workers although the employer must set the deduction of the worker’s contributions from pay.

An employer must be able to keep track of the ages & earnings of everyone who works for them at all times.

They will also have to keep records about their workers and the pension scheme used to comply with their duties.

If an individual is a Director of a company and the company has no other employees, that individual is not a worker by virtue of any office that they hold or contract of employment under which they work.

However, if the company takes a second worker and both the director and employee work under a contract of employment the both will be workers for the purposes of the employer duties.

Non-Eligible Jobholders

These workers are not eligible for auto enrolment, but can choose to opt in to a pension scheme. These include workers who either:-

1. Are aged between 16 and 74.
2. Are working or ordinarily work in the UK under their contract.
3. Have qualifying earnings payable by the employer between LEL and but below the earnings trigger (£10,000) for automatic enrolment.

OR

1. Are aged between 16 and 21, or state pension age and 74.
2. Are working or ordinarily work in the UK under their contract.
3. Have qualifying earnings payable by the employer above the earnings trigger for auto enrolment(£10,000).

Jobholders

Jobholders are workers who:-

1. Are aged between 16 and 74.
2. Are working or ordinarily work in the UK under their contracts.
3. Have qualifying earnings payable by the employer LEL.

Entitled Workers

These are entitled to join a ‘pension scheme’:-

1. Are aged between 16 and 74.
2. Are working or ordinarily work in the UK under their contract.
3. Do not have qualifying earnings payable by the employer under LEL.

All employers with at least one worker, regardless of age or earnings must:-

1. Register with the Pensions Regulator.
2. Adhere to safeguards.

Part of the auto enrolment process requires the employer to provide the eligible jobholder with information telling them:-

1. They have been, will be, auto enrolled and what this means for them.
2. Their right to opt out and their right to opt back in.

Managing Opt Outs

If an employee opts out the employer has to automatically re enrol them every three years if they are still an eligible jobholder working for that employer.

If an eligible jobholder is already an active member of a qualifying scheme on their auto enrolment date, the employer does not have to take any further action, other than to provide them with information about the scheme of which they are a member.

If a non eligible jobholder chooses to opt in to a pension scheme, they must do so by giving the employer an ‘opt-in notice’ The employer will have to pay employer contributions to the scheme.

Entitled workers do not need to be auto enrolled. If the entitled worker chooses to join a pension scheme they must do so by giving the employer a ‘joining notice’. The employer must then arrange membership of a scheme for them. The employer will have to deduct contributions on behalf of the entitled worker and pay these in to the scheme. However the employer does not have to pay in the scheme themselves, unless they choose to do so.

You can defer (postponement) paying Pensions as long as procedures are adhered to (up to three months). You have to notify the employee within one month that you are deferring Pensions.

More information on auto enrolment employer duties is available on The Pensions Regulator website

 

Auto Enrolment Employer Duties – Highland Payroll Services