Auto Enrolment Pension Schemes: What an employer needs to do
Are you fulfilling your legal requirements as a business when it comes to the complex world of Auto Enrolment Pension Schemes? Nicola Cantrill, payroll expert, explains the six steps obligations of an employer.
In the ever-evolving landscape of payroll and employee benefits, one regulation stands out as a critical pillar: Auto Enrolment Pension Schemes. If you're an employer in the UK, understanding and complying with this essential mandate is not just a responsibility, but also an opportunity to secure your employees' financial future.
Under the Pensions Act 2008, every employer in the UK must put their eligible staff into a pension scheme and pay into it. The Act was introduced in response to issues relating to retirement savings and pension provision.
When an employer takes on their first member of staff, they have a legal duty to comply with the automatic enrolment duties.
What is Auto Enrolment?
Auto Enrolment is a legislative framework designed to ensure that more workers have access to a workplace pension. It's a vital step towards enhancing the retirement security of your workforce. However, not all employees are automatically enrolled. A worker needs to meet a certain requirement before this happens.
What are the requirements for automatic enrolment?
Under the Auto Enrolment Pension Schemes, not every employee is automatically enrolled; specific criteria must be met. Here are the key requirements that determine whether an employee is eligible:
- Age: Employees aged between 22 and the state pension age (SPA) must be automatically enrolled if they earn at least £10,000 per year.
- Earnings: Employees aged between 16 and 21, or SPA to 74, must be enrolled if they earn at least £10,000 per year.
- Residency: Workers who ordinarily work in the UK and have a contract of employment in the UK fall under the Auto Enrolment provisions.
- Categories of Workers: Auto Enrolment also applies to different categories of workers, including eligible jobholders, non-eligible jobholders, and entitled workers. Each category has distinct Auto Enrolment requirements.
Actions you must take as an employer
- Identify Eligibility
Work out who to put into the pension scheme. Staff must be assessed against the eligibility criteria.
- Select the Right Pension Scheme
Choose a pension scheme as soon as possible, as it may take some time to set up. Both employer and worker will pay into this scheme if the worker is eligible.
- Enroll Eligible Staff
Add eligible staff into the qualifying scheme.
- Write to staff
Employers must write to each member of staff, explaining how automatic enrolment works. They must also write to those not eligible to be enrolled. This must also be done no later than six weeks after their duties start.
- Declare compliance
Employers need to make a declaration of compliance no later than five months after a worker's duties start. This must be done even if you have no staff auto enrolled.
- Periodic Re-enrolment
Re-enrol staff who have left the pension scheme every three years. On the anniversary date of their duties, employers must re-enrol employees who have left or opted out of the pension scheme. They will also need to complete a new declaration of compliance.
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