Many readers may be surprised to learn that auto enrolment has been in operation for large employers (250+) since 2012. The auto enrolment process will continue up to the final staging dates in 2017, but despite recent TV advertising campaigns from the Pensions Regulator featuring the larger than life character ‘Workie’, it seems some employers are still unsure or in some cases unaware of how this fundamental change may affect them and their employees.
Firstly, there are some key facts that employers should be aware of. All employers with ‘workers’ must–
- Comply with the new rules
- Auto Enrol all eligible employees
- Inform all employees of their rights
- Contribute unless employees ‘opt out’
To clarify a director of a company is not classed as a ‘worker’, unless the individual works for the company under a contract of employment, and there is at least one other person working for the company under a contract of employment. If you are a director who is not working under an employment contract, you can never be classed as a ‘worker’. These exemptions can apply to more than one director working for the same company. If however you believe auto enrolment will affect your business, and to ensure that you are not faced with penalties for non-compliance issued by the Pensions Regulator, you need to start planning for the changes, which include:
- Know your staging date by visiting the link here.
- Decide when to start the process of complying
- Select a Qualifying Workplace Pension Scheme
- Set the parameters of your scheme
- Implement the scheme plus ongoing monitoring and assessment
Initially the most challenging of these may be selecting a Qualifying Workplace Pension Scheme that is suitable for your needs. There are many options available, but if anything you should be aware that set-up and ongoing administration costs can vary considerably, so it is important to consider this carefully, along with the parameters of the scheme.
Once you have a scheme in place you will then need to ensure that it is implemented. A ‘worker’ will fall into one of three categories in that they will either be classed as an ‘entitled worker’, ‘non-eligible jobholder’ or ‘eligible jobholder’. This classification is determined by the employee’s age and qualifying earnings, and this assessment then determines how you should process that employee. You can also implement a system called ‘postponement’ for one or more employees. However, postponement does not change or delay a staging date.
There are also four occasions when communications should be sent to your ‘worker’:
The deadline for most of these communications is within 6 weeks. Also, the Pensions Regulator will require a declaration of compliance to be completed within five calendar months from staging date. Again, if this is not completed within the time frame a company could be fined.As you can see there is potentially a significant amount of work involved in the process, and this is only a very brief overview of what is a complex area. Detailed guides are available to view on the Pensions Regulator website, or if you have an adviser you may want to ensure that they are prepared and have the procedures in place to manage your auto enrolment.
Andrew Brown BSc ACIPP,
Director, Eclipse Payroll Limited