All businesses that have a payroll will need to comply with Auto Enrolment. So what exactly is Auto Enrolment? Basically it means that all employees need to be offered a work based pension and in doing this all business must comply with the regulations.
What is the cost to businesses?
- Administrative cost in order to comply
- The cost of contributing to the pension which is a minimum of 1% before 30/09/2017 going up to 3% from the 30/09/2018 of the employee’s salary
What is the cost to the employees? All employees must make the pension contribution to the total minimum contributions. So if the employer only contributes the minimum required then the employee must pay 1% before 30/09/17 up to 5% from 01/10/18 onwards.
When does a business have to comply? The Pension Regulator will send out a “staging date“ to all businesses with payroll. This is the date by which you need to ensure you comply with Auto Enrolment.
What do I need to do to comply?
- Know when you need to be ready
- Find out who to enrol
- Choose your software & check records
- Choose a pension scheme
- Automatically enrol your staff
- Tell your staff
- Complete your declaration of compliance
- Maintain records
- Fulfil ongoing responsibilities This is where your accountant or payroll provider can help you and take the burden from you
What are the consequences of non-compliance? A fixed penalty notice will be issued for £400 if fail to comply with a statutory notice. Then there are daily rate escalating penalties from £50 to £10,000 depending on the number of staff you have. There is a civil penalty for cases where you fail to pay contributions due. This is a financial penalty of up to £5,000 for individuals and up to £50,000 for organisations.
Must all employees have to have an employer pension? No. There are certain criteria that an employee needs to meet and then they also have the option to “opt out”. But the employer must be totally impartial as to what the employee decides and it must all be communicated correctly.
It is recommended that you start planning your Auto Enrolment 6 months before your staging date.
If you need any help on Auto Enrolment please do contact us.