Some 56 per cent of employers are completely unaware as to what auto-enrolment is, or do not even realise that it applies to their business and 70 per cent had no plans at all to implement this statutory process. Furthermore, 40 per cent of SMEs do not offer a pension at all and a further five per cent offer a pension but has no members. With these disturbing facts in mind here are five top tips to implement pension auto enrolment.
1. Make a plan
The implementation of pension auto enrolment can take about nine months to one year to implement so it is important to start preparing as soon as possible. It is a statutory process and can not be ignored. An employer should first be aware of their staging date (the staging date is when an employer has to start auto enrolling their employees) although it is possible to implement pension auto enrolment before then.
The employer needs to nominate a contact within the company who will be responsible for implementing the process. Working backward from the staging date the plan should incorporate sufficient time to complete the required processes such as those detailed below as well as developing admin procedures and setting up payroll.
2. Analyse the existing pension scheme
An existing pension scheme must meet the eligibility laid down by the Pensions Regulator and must be analysed according. If no pension scheme is in place then the employer has the option to implement a private pension that meets eligibility criteria or use NEST the government scheme as an alternative.
3. Assess the workforce
The workforce should be categorised into eligible jobholders, non-eligible job holders and entitled workers. Eligible jobholders will have to be automatically enrolled. They are aged between 22 and state pension age and have qualifying earnings that trigger automatic enrolment. Non-eligible jobholders are aged between 16-21 or state pension age and 74 and have qualifying earnings that trigger automatic enrolment. Entitled workers have the right to join the pension scheme but do not have qualifying earnings aged between 16 and 74. Employers should constantly monitor their workforce as an employee that suddenly become an eligible job holder due to increased salary or an appropriate birthday is auto enrolled. Also every three years employers should look to auto enrol their workforce again and repeat the process.
4. Communication with the workforce
Information about pension auto enrolment must be provided to the workers by the employer in writing. This should preferably be by letter. An employer can also decide to provide information sessions to their workforce so they can have their questions answered or could develop an information booklet (which could be given out during an induction process to new starters). Employees could benefit from face to face communication to iron out any concerns.
5. Inform the Pension Regulator and keep records
An employer must keep certain records in support of the employer duties that will enable them to demonstrate their ongoing compliance and should build these record-keeping requirements into their existing processes. The pension scheme should be registered with the Pensions Regulator.
Sandra Beale is an FCIPD qualified HR consultant providing HR and employment law support to SME businesses with issues such as grievance, disciplinary, dismissal, TUPE, redundancy, poor performance, etc.
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