Your IndustryOct 22 2015

Auto-enrolment requirements for employers

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Employers have a number of responsibilities when it comes to auto-enrolment.

They have to pay regular contributions into the pension, monitor the age and earnings of all staff, and any new staff joining, process any opt-in, joining or opt-out requests as well as keep and maintain accurate records.

Auto-enrolment means most UK employers will be obliged to put in place a qualifying workplace pension scheme and automatically enrol their qualifying workers. Employers then have to make contributions to their workers’ pensions every pay period.

The size of an employer’s business determines when they first have to enrol their workers into a workplace pension scheme. This is called a staging date.

Workers fit into one of three groups: eligible, entitled and non-eligible. A worker assessment helps identify which group workers fit into.

Eligible workers must be auto-enrolled and pay minimum contributions, however they can opt-out if they choose to. Eligible workers are those that are not already in a qualifying pension scheme at work, are aged between 22 and the state pension age, work in the UK and earn at least £10,000 a year. However, the minimum salary is reviewed by the government each tax year.

Non-eligible workers can ask to be enrolled into the scheme and if they do, the employer must pay minimum contributions. Non-eligible workers are those aged between 16 and 22 or between state pension age and 74 years old and earn more than £10,000 a year. A non-eligible worker is also classified as someone aged between 16 and 74 and earns at least £5,824 a year but less than £10,000.

Entitled workers can also ask to join, although employers do not have to pay contributions for this group. Entitled workers are those aged at least 16 but under 75 who earn less than £5,824.

The government has also set minimum standards for contributions that employers must meet.

For most employers, this means paying minimum contributions which start at 1 per cent of a worker’s qualifying earnings and increase to 3 per cent over the next few years.

Qualifying earnings mean any earnings over a minimum amount (currently £5,824) up to a maximum (currently £42,385).

These figures apply to the 2015 to 2016 tax year and will be reviewed every year by the government.

So, for example, for someone earning £18,000 a year, the minimum percentage contributions are calculated on the difference between £5,824 and £18,000, which is £12,176.

Employers can also contribute more than the statutory minimum. The minimum contribution levels are intended to set a foundation for building the savings habit.

Employers must also re-enrol every three years and over time all of this should become ‘business as usual’, just like real-time PAYE.

According to Griselda Williams, head of business development at Trust Pensions, the fact auto-enrolment has so many stages makes it very important that employers keep records for six years of the employee data and pensions contributions reports.

Ms Williams says information should also be kept about any decisions they have made, such as why they chose a particular scheme, or any judgement calls they have made about which of their workers are eligible to be considered for assessment.

She says it is also important that enrolled employees provide personal email addresses to the pension schemes, so that if they leave a company, the pension scheme can stay in touch with them.