Workplace Pensions and Auto Enrolment
Seize the Day - Get Ready!
The National Audit Office released a report in November 2015 showing 58,000 employers had enrolled 5.4 million people into a Workplace Pension scheme by the end of August 2015.
On the face of it Workplace Pensions and Auto-Enrolment has been a success but so far only 3% of employers have reached their staging date. The staging date is the date by which businesses must comply with their employer and workplace pension obligations.
At the start of 2016, there are around 1.8 million firms still to comply with the new pension legislation. This year will be a big test for over 500,000 small and medium enterprises who try to get to grips with the new legislation and understand their duties under the new rules.
Will it apply to your business?
Broadly, businesses fall into 3 distinct categories.
- Those with no Employer Duties
- Those with Employer Duties and must arrange for a Workplace Pension scheme
- Those with Employer Duties who do not have to arrange for a Workplace Pension scheme
The distinction is driven by whether a business has at least one worker, other than non-contractual directors, who meets all of the following criteria making the worker an Eligible Job Holder;
- Worker earns over £192 per week (or £833 per month)
- Are aged 22 or over and
- Are under state pension age
Business with no Employer Duties
Where there is a sole director with no other staff or if there are a number of directors, none of whom has a contract of employment then the business will not have any Employer Duties.
However, the business must inform The Pensions Regulator that they are not an employer if they have not already done so.
Businesses with Employer Duties and must arrange for a Workplace Pension scheme
Businesses that have at least one Eligible Job Holder will have Employer Duties that will include;
- Having a Qualifying Workplace Pension Scheme in place ready to accept members
Operating a new payroll process each pay day called Auto-Enrolment where you work out who should be brought into the pension scheme without their say so
- Work out pension contributions paid by your business and taken from your workers’ pay
- Provide statutory communication to all your workers informing them about the workplace pension scheme.
- Even for those who are not automatically enrolled have a right to join the scheme
- Complete the Declaration of Compliance with The Pensions Regulator within 5 months of your staging date including Pension scheme details and payroll statistics
Businesses with Employer Duties who do not have to arrange for a Workplace Pension scheme
Businesses where none of their workers are Eligible Job Holders at the staging date will have Employer Duties that will include;
- Providing statutory communications to all workers informing them that they will not be automatically enrolled in to a workplace pension scheme and why
- How workers can join the workplace pension scheme if they want to
If no worker asks to join the pension scheme the business can complete the Declaration of Compliance with The Pensions Regulator, indicating that they are an Employer with duties who does not have to provide a pension scheme at this time.
If any existing or future workers become eligible job holders or an existing worker asks to join the workplace pension scheme then the business owner must inform
The Pensions Regulator, arrange for a qualifying workplace pension scheme and begin to follow Auto-Enrolment processes.
“Payroll is the Plumbing for Auto-Enrolment”
Just having a pension scheme in place is not enough for you to meet the new rules. You must ensure that you have a robust method of meeting all your on going duties.
To that end, payroll is critical in autoenrolment.
It is the plumbing where payroll and pensions flow together by working out who should be brought
into a workplace pension scheme, the amount of contributions, running statutory communications for workers and generating files for pension providers.
Without good payroll systems and understanding a pension provider’s requirements businesses will struggle to meet their obligations and risk incurring penalties from The Pensions Regulator.
With 500,000 small and medium sized firms to comply with the new legislation during 2016 you must ask yourself “What am I going to do?”, “Should I find the information for myself?”, “Where’s the obvious place to start?”.
There will be a high demand for workplace pension schemes, payroll services and auto-enrolment advice. Make sure you don’t leave it too late.