Auto-enrolment: What it means for your business

What does auto-enrolment mean? When do you need to begin the auto-enrolment process? And how can you get ready for auto-enrolment? Startups covers the bases in this guide…

What is auto-enrolment?

Are you in? If you’ve seen the £3.5m “I’m in” ad campaign featuring Karren Brady and Theo Paphitis and not done anything about it, then you really must read on as it’s time for every small business to act. Fortunately, it’s not too late and doesn’t have to be too painful, starting with this guide.

To be clear, auto-enrolment (automatic enrolment) is part of The Workplace Pension Reform, which requires every UK business to automatically enrol workers into a workplace pension scheme if the worker

  • Earns more than £10,000 for the tax year 2014/15
  • And is aged between 22 and the state pension age

With business owners now legally responsible to help staff save for their retirement for the very first time, it’s unsurprising a number of employers have raised concerns about when they need to begin auto-enrolment and the costs and impact these changes will have on their business. Even if you already pay into an employee pension scheme, you will need to check if it’s suitable for auto-enrolment.

The law has already come into place for large employers that have hundreds of staff but for small businesses there’s still plenty of time to begin automatically enrolling your employees into a workplace pension as there are different staging dates (see below) being rolled out depending on company size.

As of January 1 2016, businesses with 30 employees or less will have to start the auto-enrolment process with the staging deadline set for April 1 2017.

Read on to find out how to get your business prepared for auto-enrolment….

What does auto-enrolment mean for your business?

As part of these changes to workplace pensions under the Pensions Act of 2008, there are a number of steps you will have to take to ensure that your business is auto-enrolment ready:

  1. Once you’ve found out your staging date (see below) you will need to set up a workplace pension scheme or review your existing pension contributions.
  2. You must communicate these new pension rules with your employees in a written letter. You can find template auto-enrolment letters here.
  3. Automatically enrol all of your eligible workers.
  4. Register your business with The Pensions Regulator and keep a record of this.
  5. Contribute to your employees’ pension pots on a regular basis.
  6. Facilitate any opt-out requests and arrange refunds.
  7. Maintain up-to-date and accurate records.
  8. You’ll need to constantly review your employees including any new starters.
  9. Complete your declaration of compliance with The Pensions Regulator.

If you don’t set up a workplace pension scheme for your employees within the timelines, then you could face fines and penalties. Fines also apply if you fail to complete your ongoing auto-enrolment duties.

Auto-enrolment staging dates

Businesses must enrol staff ahead of the government-issued staging dates which are staggered according to company size and the number of people within an employer’s PAYE scheme. You must register with the Pensions Regulator within four months of your staging date.

  • From August 1 2015 – Businesses with 30-49 employees must start the auto-enrolment process.
  • From January 1 2016 – Businesses with 30 staff or less must begin auto-enrolment.
  • From April 1 2017 – Businesses without PAYE schemes must start the auto-enrolment process.

These staging dates will vary business to business, the government Pensions Regulator offers a free staging date calculator to enable you to accurately find out when you will need to enrol your employees. Click here to view.

The governmen recently published a revised auto-enrolment timetable which you can view here.

You can change your staging date to a later date if you:

  • Had fewer than 50 employees on April 1 2012
  • Had, or were part of, a PAYE scheme with more than 50 people in it

Find out more about changing your staging date here.

How to get ready for auto-enrolment

For many small businesses, the procedure of setting up and running a pension scheme can seem daunting but there is a number of auto-enrolment and pension services that can help you navigate the process.

Cloud-based accountancy software providers Sage and Intuit QuickBooks UK are both offering auto-enrolment services as part of their packages for small businesses. Intuit recently announced that business owners can manage auto-enrolment within its payroll feature with the software able to automatically calculate the exact contribution to an individual’s workplace pension scheme based on earnings. Likewise, Sage’s software is auto-enrolment ready and it offers payroll software which promises to “eliminate the burden” of auto-enrolment.

In recent months a number of start-ups have entered the pensions market with the goal to help small companies set up a workplace pension scheme with “less hassle”. Two such businesses are Smart Pension; a start-up launched last month which enables business owners to immediately set up a pension scheme for free from any device “within minutes”, and Enrolsme; a complete auto-enrolment platform which says it will help you design a pensions scheme for your business in 30 minutes.

AutoEnrolSME and Financial Satnav also provide similar auto-enrolment set-up services and NatWest recently announced that businesses can now manage auto-enrolment through its new payroll service; an end-to-end solution designed to “free up time” for business owners.

The Pensions Regulator offers impartial advice and guidance on choosing auto-enrolment software here.

What will you need to do after auto-enrolment?

Once your auto-enrolment is complete, there are a number of responsibilities and duties that you will need to maintain:

  • You will need to regularly assess your workforce and any changing circumstances such as changes in ages, earning threshold and so on, and enrol any workers that are eligible.
  • Re-enrolment every three years – you will need to re-assess your employees every three years from your staging date. Any eligible employees who chose to opt out previously will have to be automatically re-enrolled and they will then need to individually opt out.

Auto-enrolment checklist

 Know my staging date

 Set up a pensions scheme (or check my existing one)

 Assess and enrol employees

 Register with Pensions Regulator

 Communicate changes with employees in writing

 Regularly pay into employees’ pension and keep up-to-date records

 Inform Pensions Regulator that you have met your auto-enrolment duties

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