At McDade Roberts we have a dedicated payroll department that deal with clients payroll issues so that you don’t have to. One question our team at Longridge get asked frequently is about the new rules around Auto Enrolment. We hope the below information is of interest to you but feel free to call our office for any more help.
What is automatic enrolment?
Automatic enrolment places duties on employers to automatically enrol ‘workers’ into a work based pension scheme. The main duties are:
- assessing the types of workers in the business
- providing a qualifying automatic enrolment pension scheme for the relevant workers
- writing to most of their workers explaining what automatic enrolment into a workplace pension means for them
- automatically enrolling all ‘eligible jobholders’ into the scheme and paying employer contributions
- completing the declaration of compliance and keeping records.
Assessing the types of workers in the business
Whether this is an easy or difficult task depends on the type of business. A business which uses the services of casual workers, very young or very old workers will need to spend some time in analysing its workforce. A business which only employs salaried staff will have an easier task.
A ‘worker’ is:
- an employee; or
- a person who has a contract to provide work or services personally and is not undertaking the work as part of their own business.
There are three categories of workers: eligible jobholders; non-eligible jobholders; and entitled workers.
An ‘eligible jobholder’ is a worker who is:
- aged between 22 years and the State Pension Age
- earning over the minimum earnings threshold (currently £10,000)
- working or ordinarily working in the UK
- not already in a qualifying pension scheme.
Most workers will be eligible jobholders unless the employer already has a qualifying pension scheme. These are the workers for which automatic enrolment will be required.
Other workers (non-eligible jobholders) may have the right to ‘opt in’ (i.e. join a scheme) and should therefore be treated as eligible jobholders. ‘Entitled workers’ are entitled to join the scheme but there is no requirement on the employer to make employer contributions in respect of these workers.
The categorisation of workers can be difficult in some circumstances. Please contact McDade Roberts if you are unsure how to assess the types of workers you have.
What is a qualifying automatic enrolment pension scheme?
Employers are able to comply with their obligations by using an existing qualifying pension scheme, setting up a new scheme or using the government low cost scheme - the National Employment Savings Trust (NEST).
It is important that the pension scheme chosen will deliver good outcomes for the employee’s retirement savings. This may mean that an employer’s existing scheme may not be appropriate as it may have been designed for the needs of higher paid and more senior employees. This may mean that NEST for example may be an appropriate scheme for employees who are not currently entitled to be a member of an existing employer scheme.
To be a qualifying automatic enrolment scheme, a scheme must meet the qualifying criteria and the automatic enrolment criteria.
To be an automatic enrolment scheme, the scheme must not contain any provisions that:
- prevent the employer from making the required arrangements to automatically enrol, opt in or re-enrol a ‘jobholder’
- require the jobholder to express a choice in relation to any matter, or to provide any information in order to remain an active member of the pension scheme.
We may be able to advise you on an appropriate route to take. Please contact us.
Does automatic enrolment apply to all employers?
The law came into force for very large employers on 1 October 2012 and has been rolled out with staggered implementation dates or ‘staging date’ by reference to the number of employees.
From October 2017, all new employers have automatic enrolment duties from the date they employ their first member of staff.
An employer can find out more about their duties at www.thepensionsregulator.gov.uk.
How we can help
As you can see pensions automatic enrolment is not straightforward. Please do contact us at McDade Roberts for help and advice. We can help you to manage the road to automatic enrolment and help you to comply with the requirements when you are in automatic enrolment. We will also be releasing part 2 of this blog soon so keep coming back for up to date information to help you manage your business.