Automatic enrolment- workplace pensions – The basics
The law on workplace pensions has changed. Under the Pensions Act 2008, every employer in the UK must put certain staff into a pension scheme and contribute towards it. This is called ‘Automatic Enrolment’.
Automatic Enrolment applies to all employers who have at least one member of staff. It doesn’t just apply to businesses; if you employ someone directly to work for you – like a cleaner, personal care assistant or nanny, for example – you are an employer and will need to ensure that any eligible employees are enrolled into a workplace pension.
If you deduct income tax and National Insurance contributions from the wages of the person you employ, then you are usually their employer. If you have used an agency to hire the person and the agency pays their National Insurance contributions, the agency is the employer and you don’t need to do anything.
You will need to enroll each employee into a workplace pension scheme if they:
• are not already in one
• are aged between 22 and the State Pension age
• earn more than £10,000 a year
• work in the UK
There are detailed rules relating to those who earn different amounts, and work for different hours.
Each employer will be given a staging date which is when you have to start paying into the scheme you have created for your employees. If you have less than 30 employees this date will be between 1 January 2016 and 1 April 2017, the date depends largely on your postcode.
Once the scheme is set up you have to pay contributions to the scheme on behalf of your employees the contributions start at 2%, including 1% contributed by the employee. They rise over time and from 5th April 2019 the contribution is 8% with 5% provided by the employee.
There are two options as to how you operate the scheme, you can use a provider such as a major insurance company or use the NEST scheme which is provided by the Government. If you fail to register or make the contributions, you will be fined by the pensions regulator.
Most commercial payroll software packages will calculate the contributions for you based on the employees pay and this will enable you to deduct the employee’s contributions directly from their pay packet or salary, The payments must be made to the scheme by the 22nd of the month