The Pitfalls of Auto Enrolment
Since April 2012, all UK employers are legally
obliged to auto enroll all eligible
workers into a qualifying pension scheme by
a specific deadline (‘staging date’). Where this
applies you must by law create and maintain
detailed records of correspondence with
workers, workforce assessments, joiners and
leavers and pension payments. This is one of the
most onerous challenges to face the businesses
in recent years and the financial penalties for
breach can be severe.
You will have a duty to assess (and continually
reassess) your workforce to be able to identify
which of your employees will be eligible to
be automatically enrolled. For this purpose,
workers have been arranged into three
categories: Eligible Jobholder, Non-Eligible
Jobholders and Entitled Workers. Whilst
only Eligible Jobholders are required to be
automatically enrolled, Non-Eligible Jobholders
have a right to opt-in to an auto enrolment
pension scheme and Entitled Workers have
a right to join any pension scheme. It is your
responsibility as an employer to ensure that you
communicate with each individual worker to
ensure that they are aware of their rights.
It is also necessary for you to set up a qualifying
pension scheme. This involves working with an
Independent Financial Adviser to review any
existing pension arrangements or to design
a new scheme that will suit the auto
enrolment criteria.
Once set up, you will be responsible for ensuring
that both employee and employer contributions
are paid into the scheme at the correct amount
and that payroll accurately reflects these
contributions.
Throughout each stage of the auto
enrolment cycle, you must create and maintain
detailed records. These records must be
available for review by the Pensions Regulator
whenever requested.
Your employees must be aware of their rights
and you must be aware of your duties and be
ready to act on them to avoid breach of the rules
and imposition of financial penalties.
There is a fixed penalty of £400 for noncompliance.
That’s bad.
But even worse are the daily penalties that
range from £50 per day for a business with up to
4 employees (rising to £500 per day if you have
just 5 employees) through to £10,000 per day
where there are 500 or more employees. That’s
severe.
Consider this…
We are aware of a company employing 70
employees. They should have auto enrolled on
1 August 2014. The lady who did the payroll for
the company knew that something needed to be
done but the accountant acting for the company
didn’t think there was an immediate rush. The
reality was very different.
At the time we came across this story the
company was due to pay a fixed penalty of £400
for being late. But that paled into insignificance
compared with the £2,500 daily penalty for a
company of that size. These daily penalties had
built up to a staggering £760,000 by the time it
came to light in June 2015.
If you have not yet reached your staging date
you need to make sure you know exactly when
it is and allow at least three months to plan.
We can help you get set up with automatic
enrolment and take away the pain and hassle.
And even if you have already staged for
automatic enrolment you’ll know the ongoing
work required and your obligations are
significant. We can make life much easier for
you with our automatic enrolment solution. As
part of our automatic enrolment service we will
review your position and advise to help ensure
you are complying with this onerous legislation
and minimise your exposure to penalties.
We can help you to comply with your Auto Enrolment responsibilities
If you haven’t yet reached your staging date we can sort that out with our auto enrolment set up service.
And if you are set up to for auto enrolment we can support you by assessing your workforce every pay period, processing opt-outs and opt-ins,
re-enrolling eligible workers, reporting to The Pensions Regulator, calculating your contributions for each pay period and much more.
Prices for both set up and on-going support are based on the number of employees and frequency of pay.
And we have three packages which means you can choose the option which
best meets your needs. And if you choose, we can easily add on an option to deal with your automatic enrolment.
Most clients also ask us to do their payroll too. If we carry out your payroll there are big discounts available. This is simply because if we are already doing your payroll some of the work will already be done.
Auto Enrolment Set up
Confirm your staging date – Your staging date is very important. It’s the date your auto enrolment obligations start and the penalties
for not being ready are very severe. Remember, not only £400 for non-compliance but daily penalties of up to £10,000 per day.
Healthcheck: Your initial workforce assessment – The initial assessment of your workforce will identify if you have any employees who will need to be automatically enrolled.
If you do, you’ll need a pension scheme in place. This process should start 3 – 6 months before your staging date. The definition of ‘worker’
under the legislation is widely drawn (not limited to people paid through the PAYE system) and it’s important not to accidently exclude
workers from the auto enrolment process as this contravenes auto enrolment duties. These complex rules will catch out the
unwary; our solution will mean you can rest easy knowing you are compliant.
Acting as the point of contact for the Pension Regulator – The Pensions Regulator will send regular emails at key stages in your planning
process so it is important to establish who will
be the nominated contact person (this can be someone within your business or – if you want to remove the hassle – our automatic enrolment
manager who will do it all for you).
Employee communications – You must tell your employees how automatic enrolment applies to them and explain their rights (such as their right
to opt out). Although this is time consuming, we will start the process of communicating with your workforce to raise awareness about how
automatic enrolment will affect them. This must be done within 6 weeks from your staging date.
Confirm your systems are automatic enrolment compliant – We will review your software and other systems. If it is not compliant
with automatic enrolment we will recommend alternative solutions.
Assess the workforce – On your staging date, or on the last day of the postponement period, we will formally assess the ages and earnings
of each employee. Using automatic enrolment compliant software we will enroll eligible job holders.
Completion of the Declaration of Compliance – Registration is managed online and you need to provide a huge amount of information,
such as the employer address and your PAYE reference, when you set up your pension scheme, information about the pension scheme and more. But don’t worry; we’ll take care of that for you. For example, we will assist you in registering your pension scheme with The Pensions Regulator. By law this must be completed within 5 months of your staging date.
As part of our full auto enrolment services we will additionally carry out the following :
Develop your auto enrolment action plan
This is a powerful planning tool, which will set out the key dates and responsibilities.With this one-year plan you will understand what to do
and by when.
Recommendations on setting up the pension scheme
We will look at your options and set out the necessary steps. This will include a review of your existing pension.
Postponement planning
The rules of postponement open opportunities for planning which will save you money and time. For example, if you have temporary or short-term employees who you know will stop working for you within three months. We will work out your optimum deferral date and advise you on your postponement policy.
Phasing Plan
Prior to staging date we will review the potential to save money by advising you of the reduced contributions which can be made up to key increase dates. This reduced amount will increase until the maximum contribution is reached in October 2018.
Calculating the cost
On your staging date we will assess your workforce and calculate the cost of your additional wage bill for pension. This will ensure you know what to must be paid and be confident you are paying the correct amount.