Auto-enrolment

By Gary Robinson | May 21, 2020 |

Auto Enrolment

It is now law that as an employer you have legal obligation to offer a workplace pension to all employees and any new starters in the future although as this has been law for a few years already most existing employees have already been enrolled in the pension.

As an employer you also have a duty to offer the workplace pension to employees who declined to be automatically enrolled when this first became law a few years ago.

With new employees you should include this in your onboarding process as they qualify for automatic enrolment the day they start work at the company.

When this was becoming law the pension regulator insisted that for automatically enrolling everyone that worked for the company should be offered a pension providing this included and sub-contractors that do all their work for the company and this is very different to that tax treatment but with I/R 35 rearing its head with umbrella companies from April 2020 only the definition of a small company will be exempt as per the companies act.

Pension Scheme

You must automatically enrol all staff who are:

aged 22 to state pension age
working in the UK
earning over £6,136 a year.

Some staff who don’t meet the criteria above can opt into the pension scheme you’re using for automatic enrolment. You must put them in if they ask.

You’ll have to pay a minimum employee contribution for all staff you put into this scheme, but the employer has no duty to pay contribution into this as you are outside the auto enrolment legalisation.

It’s the age and earnings of a member of staff that determines what ‘type’ of worker they are and therefore what duties you’ll have for them.

You’ll need to write to each member of staff individually to tell them how they’ve personally been affected by automatic enrolment.

Setting Up a Pension Scheme

If you don’t have a pension scheme, or don’t want to use an existing scheme, you’ll need to find a provider that can offer an automatic enrolment scheme. Make sure the scheme meets legal requirements and is good quality.

When you’ve chosen a provider, you’ll need to work with them to get your scheme up and running.

With the introduction of automatic enrolment, the requirement for an employer to provide access for staff to a stakeholder pension scheme has been removed to avoid employers being subject to overlapping duties.

The employers will pay contributions of 3% into the pension while the employee will put in 5% from their weekly or monthly pay.

One such query this year is where an employer correctly enrolled all of his staff into the scheme and now one of his employees is looking to get a mortgage and looking to cut his spending wherever possible so they meet the affordability on the mortgage application.

He then asked is he could stop paying into the pension scheme but by doing this it meant as the employee was not paying into the scheme then the employer was not legally required to pay into this either so one option the employee is now looking into is to reduce the amount he pays in to 2% so the employers will then still contribute as well.

Re-enrolment

Once you have had the pension scheme running for three years you will need to a similar process called re-enrolment which is where you will need to go through the process of re-enrolling those who have opted out just like you did at the start and if they decide that they still want to opt out then they can do this.

By opting out they simply ring up the pension provider e.g. Nest, Peoples Pension they are the most common amongst the SME market and they will opt you out.

Team Retention

Back when automatic enrolment was becoming law the pension regulator stance on this was that by offering a pension this will increase retention in the company although I think everyone has their own opinion on this.

Covid 19

If you have made furlough claims then you can claim the pension part of this back on the month you are claiming for along with the team wages, and employers national insurance.

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