By the end of 2018, a staggering 1.3 million companies will have had to implement a compliant pension scheme for their employees.
We’ve put together a brief outline as to what Automatic Enrolment is and what is required of you as an employer.
What is automatic enrolment
Automatic Enrolment will place new responsibility on you to automatically enroll your workers into a work based pension scheme. This will entail:
- Assessing the types of workers in your business
- Providing a qualifying Automatic Enrolment pension scheme for the relevant workers
- Writing to all applicable workers outlining what Automatic Enrolment into a workplace pension will mean for them.
- Automatically enrolling all ‘eligible jobholders’ into the scheme and pay employer contributions.
- Registering with The Pensions Regulator and be responsible for keeping records.
Assessing the types of workers in the business
We would suggest that a company that has on its books a variety of casual, young or older workers should put some time aside to analyse the make-up of its workforce. A business which only employs salaried staff will have an easier task.
Here is a brief overview to the definition of ‘worker’:
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.
An ‘eligible jobholder’ is a worker who is:
- Aged between 22 years and the State Pension Age
- Earning over the minimum earnings threshold (£8,105 2012/13). It is likely that the minimum earnings threshold will be changed in line with the income tax single person’s allowance in future years.
- Working or ordinarily working in the UK
- Not already in a qualifying pension scheme.
When does Automatic Enrolment apply to an employer?
The law came into force for very large employers on 1 October 2012. The Automatic Enrolment rules have been staggered so that the implementation starts with businesses that have the largest number of employees first.
The table below outlines how the staging dates will work. From this, an employer can work out when the Automatic Enrolment rules will have to be applied as the implementation date (or ‘staging date’) is set by reference to the number of persons in an employer’s PAYE scheme on 1 April 2012.
An example of the staging dates:
|No. of employees||Staging date|
|250||1 February 2014|
|62||1 July 2014|
|50||1 April 2015|
For those with less than 50 employees the earliest start date is 1 June 2015 but the precise date will depend not only on the actual number of employees on 1 April 2012, but also an employer’s PAYE reference number.
So if you are an employer, look at the number of employees you had on the 1 April this will give you a clearer indication of where you stand within these dates.
Communicating with your workers
Employers are required to write to all workers (except those aged under 16, or 75 and over) explaining what Automatic Enrolment into a workplace pension means for them.
Should you need any guidance, The Pensions Regulator has developed a set of letter templates to help Employers when writing to its employees.
Automatic Enrolment payment of contributions
|Transitional period||Duration||Employer minimum contribution||Total minimum contribution|
|1||Employer’s staging date to 30 September 2017||1%||2%|
|2||1 October 2017 to 30 September 2018||2%||5%|
|3||October 2018 onward||3%||8%|
Registering with The Pensions Regulator and keeping records
An employer must register with The Pensions Regulator within four months of the staging date and the registration process requires the employer to do the following:
- Confirm that they have followed the correct auto enrolment procedures
- Provide an assortment of information including the number of eligible job holders