If you’re a business employing up to 30 people, preparing early is key, especially if you want to avoid paying a penalty.
Although workplace pensions have been around for years, auto-enrolment (AE) pensions emphasise the fact that workers have to opt out rather than in. Employers are obliged to pay in as well, with the government adding a little extra through tax relief.
The scheme has been phased in to ensure smaller businesses have time to prepare for the new laws. Ultimately, compliance lies with the employer and enforcement action can ensue if deadlines are missed.
Approaching auto-enrolment may seem like a daunting prospect and there are a lot of things to consider, particularly for firms that have never set up a pension scheme before. But a little planning can go a long way, and taking a thorough approach will certainly pay dividends.
The staging date is when your automatic enrolment duties first come into force. This is based on the total number of employees who were in your PAYE scheme on 1 April 2012.
It’s worth noting that the more people in the PAYE scheme at that time, the earlier the staging date. If your company had fewer than 30 staff on this date, you will need to start auto-enrolling staff between 1 June 2015 and 1 April 2017 (the precise date is determined by the employer’s PAYE reference number).
If you use more than one PAYE scheme, your staging date will be based on the total number of people in the largest scheme that you use.
New employers will have staging dates of up to 1 February 2018, depending on when the payroll starts. Many businesses have just one director and no other employees. In this case, there’s no need to panic because AE does not apply but you will need to declare this to HMRC. If a spouse is also a director then the same thing applies. If the spouse is not a director but an employee then the company will be subject to AE.
Meanwhile, if you’re unsure of your staging date, then you can ask HMRC. All employers should in any event receive a letter from The Pensions Regulator advising them of their staging date a year or more in advance of that date.
Employers can bring forward their staging date, while some small employers can choose to move their staging date back if, on 1 April 2012, they employed fewer than 50 staff and had – or were part of – a PAYE scheme with more than 50 people in it.
D-day is 1 October, 2017 – every business has to be registered.
Employers who fail to comply with the auto-enrolment regulations may be subject to statutory notices, penalties or escalating fines by The Pensions Regulator, such as:
- Warning: The Pensions Regulator sends the employer a compliance notice.
- Fixed fine: If the employer doesn’t comply, The Pensions Regulator issues another warning and a fine of £400.
- Daily fine: Where the employer continues to break the regulations, there will be a fine for each day, with the penalty increasing until the company complies. The daily amount depends on the number of the employees.
Further non-compliance may result in court action. The penalty can be expensive so it is vital the necessary steps are taken now. And don’t forget, any new business has to sign up to auto enrolment when they incorporate.
This can all be quite complex but specialist advice is available – it could make all the difference in ensuring the transition is smooth, hassle-free and financially efficient.
Navin Thaker is a partner at chartered accountancy firm HW Fisher & Company.
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