What the start of auto-enrolment means for SMEs

Since October 1st 2012, all employers are required to automatically enrol workers into a workplace pension. Auto-enrolment is being phased in over a six-year period, from October 1st 2012 to February 1st 2018, starting with large employers and moving on to smaller ones. 

To find out when your business has to begin auto-enrolment ? your staging date – check the Pension Regulator?s website. Your staging date is determined by the total number of persons in your PAYE scheme on April 1st 2012. To look up your staging date, you’ll need to know the size of your PAYE scheme and PAYE scheme reference. The Pensions Regulator will contact employers 12 months before their staging date. 

All employers, regardless of the number of people they employ, are, from their staging date, legally required to automatically enrol eligible jobholders, who are not already in a qualifying pension scheme, into an existing or newly established qualifying pension scheme. Alternatively, if you do not wish to run a qualifying pension scheme, you can use a scheme set up by the government: the National Employment Savings Trust (NEST).

Eligible jobholders are:

  • Aged between 22 and state pension age;
  • Work, ordinarily in the UK; and
  • Have qualifying earnings above the earnings trigger for auto-enrolment (currently set at ?8,105, the income tax threshold for the tax year 2012/13).
The term “jobholder” is not limited to employees. It covers most categories of worker and includes anyone who has a contract to provide work or services personally.

Within four months of your staging date, you will need to register your qualifying scheme with the Pensions Regulator. Registration is an online process and involves providing the Pensions Regulator with details about your business, your qualifying scheme and, if applicable, the number of eligible jobholders you have enrolled.

You must provide all of your workers, except any who are aged under 16 or over 75, with written information about their rights in relation to auto-enrolment. The required written information may be sent by email, but it is not sufficient just to put the information on to an intranet or notice board. 

You are required to make contributions into the qualifying scheme for all jobholders who have opted to join. Contributions are based on a percentage of the worker?s qualifying earnings within a lower limit, (currently ?5,564, in line with the lower earnings limit for NI contributions for the tax year 2012/13) and an upper limit (currently ?42,475, in line with the upper earnings limit for NI contributions for the tax year 2012/13). These limits are subject to annual review.

Wilful failure to comply with auto-enrolment is a criminal offence. Penalties on conviction will be a fine, imprisonment or both.

Beth Brierley is a solicitor with Riverview Law.

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