We’ve made auto-enrolment so much of a focus that a specific mini online hub has been created – populated by content that will help you, as a business owner, through the process of becoming compliant.
The centre piece of this is our new digital guide, packed full of fellow business owners discussing their own unique approach to auto-enrolment. From Martha Lane Fox’s Lucky voice through husband and wife operation Independence Pay, each have shared stories with Real Business.
However, for the time-poor out there we’ve assembled a handy checklist to serve as a starting point.
Know your staging date
Each employer is allocated a staging date, and full compliance with auto-enrolment duties must be confirmed in the form of a declaration of compliance – no later than five months after the staging date. The Pensions Regulator will write to an employer at least 12 months before the staging date. However, it’s important to find out your staging date as early as you can – to help with planning. Find out yours by visiting the Pension Regulator’s website.
Assess the likely impact for your organisation
Companies should start planning for auto-enrolment at least six months before a staging date. Planning will need to encompass payroll and other systems required to implement auto-enrolment. Identifying and choosing a pension provider will also need to be done well before the the staging date.
Employers also need to consider the likely financial and administrative impact. According to The Pensions Regulator, you must think about the one-off costs of setting up auto-enrolment as well as the ongoing cost of paying money into the scheme and managing the process. You can do this yourself or get in touch with a financial adviser, accountant or payroll provider.
According to figures from the The Pensions Regulator, based on employers with between one and four staff members, costs ranged between £200 and £1,000 for general advice and support to set up for auto-enrolment. This can include choosing a scheme, working out who to put into the scheme and setting up payroll.
Find a pension provider
When choosing a pension scheme provider there are a number of options to choose. There are some pension schemes aimed at small employers that do not have set-up or monthly charges for auto-enrolment, while other schemes may charge. Some schemes may also manage some or all of the auto-enrolment tasks for you.
As a business owner, you should ask the provider what it will charge you based on how many staff you have and decide which charging method is best for you. You should also ask the provider what charges the scheme members will pay.
An employer also needs to pay money into the pension scheme, after you’ve put your staff into it and every time you pay them. This is known as “making contributions”. The total minimum contribution until April 2018 is equivalent to two per cent of an employee’s gross earnings within a specific band (for the 2016/17 tax year this is between £5,824 and £43,000 a year). The employer must pay at least one per cent of this, but can choose to pay the full amount.
Ensure your payroll software can cope
Another key consideration is discovering what auto-enrolment tasks your current payroll system can provide, and whether it will provide all the information that your pension scheme provider needs. If your payroll is run by an accountant, bookkeeper or payroll agency, you will need to check if auto-enrolment is included in current charges or if extra will be charged. Real Business found out that, for small employers who did pay extra, overall this set-up cost was between £100 and £400. If you manage your own payroll and use payroll software, find out if it can already work with auto-enrolment.
It is vital that, whether you choose to run your own payroll or outsource it to someone else, you have a secure system in place which can enrol all those eligible for the pension scheme, monitor staff who choose to opt out of the scheme and give any who may have been too young or not earn enough to enrol in the scheme the chance to do it when they become entitled.
Minimum contributions from employers will ramp up over time, so again the payroll system and software must be able to cope with these changes. If not, it could be an administrative nightmare.
Communicate the changes to staff
For workers who need to be auto-enrolled, an employer must provide information within one month of the auto-enrolment staging date. It should include basic information on the scheme such as contributions payable. Employers must also tell the staff about the right to opt out and to opt back in again at a later date.
Those under 22, or over state pension age whose earnings amount to more than the £10,000 threshold, must be told they can join a qualifying pension scheme if they want to. The employer may instruct someone else to provide the information to workers, but it is still the employer’s responsibility to check that the information provided is correct and that any deadlines are met. Ongoing communications, such as opting in new employees, must also be managed.
Talk to The Pension Regulator
The Pensions Regulator is the go-to body for advice and guidance on an employer’s auto-enrolment duties. As the UK regulator of work-based pension schemes, it works with trustees, employers, pension specialists and business advisers. The Pensions Regulator provides detailed guidance on all aspects of auto-enrolment, including pension schemes, and is able to help businesses understand what will happen if compliance is not met.
If, as the owner/manager of an SME, you’d like further guidance on auto-enrolment then visit The Pensions Regulator website, where you’ll also be able to discover your personal situation through its Duties Checker system.