Workplace Pensions and Auto Enrolment

The auto enrolment process and running a workplace pension as an employer is pretty straightforward. Many small firms experience little problem in running their own schemes without the need to outsource the function to firms like MAAP.

The one area that does surprise small employers is how quickly they can suffer a £400 fine for not managing their scheme and failing to make the payments on time.

You can read all about the auto enrolment process in the following Pension Regulator’s guide or visit their website for the latest news and guidance.

The final stage of implementation of the work place pensions scheme will take effect in April 2019. As an employer, you may find many low paid employees will find the increase in deductions from 3% to to 5% too much for them to sustain, especially if Brexit causes a rise in inflation this year. Each scheme will have a different opt-out method and employers should know how to advise their employees on how to leave the scheme if they wish to do so.

Dates Employee Contribution Employer Contribution Total Contribution
Before 05-04-18 1% 1% 2%
06-04-18 to 05-04-19 3% 2% 5%
06-04-19 onwards 5% 3% 8%

Most employers have now successfully implemented their work place pension schemes and seem to be managing the process without too many problems. The one area that is catching people out is failing to recognise early enough the situation where a previously non-qualifying employee reaches the point where they must be auto-enrolled. Increase in wages, a bonus, or changes in working hours can all conspire to trip their earnings over the lower limit that triggers auto-enrolment. Failure to auto-register on time may result in fines and catch-up payments … So it is certainly worth looking through the payroll figures each month to make sure all employees are processed through auto-enrolment at the correct time.

Another looming problem for firms who rely upon engaging workers who are not paid directly through the firm's payroll, is the potential to suddenly find these workers have accrued employment and pensions rights. If you engage 'self-employed' workers to carry out work where they effectively only provide you with their labour … then please contact us to discuss the 'employment status' issues involved. There are significant and hidden taxation and penalty issues that can affect this kind of working arrangement, which is typically found in the construction, logistics and taxis-driver sectors, to name but three. The HMRC are increasing taking a hard-line on those firms who engage in disguised employment, and reports of companies and individuals be forced out of business into insolvency over large back-duty assessments are on the increase.

The First Steps of Auto Enrolment

Know when you need to be ready

We have already identified the staging dates and account references for all of our clients and started scheduling the steps that they will need to taken in the run-up to auto enrolment.

Most employers will already have received a letter from the Pension Regulator giving you a unique ‘letter code’ and advising you of your staging date.

You can always obtain the same information online by clicking here and enter your PAYE Reference and/or Payroll Accounts Office Reference Number as required.

Take a look at this useful summary page of the actions you as the employer will need to take to complete the auto-enrolment process.

Start planning at least 6 months before your staging date

The Pension Regulator provides an excellent interactive enrolment planner we recommend you use to help you prepare. It provides clear and consist guidance on what steps you should take and when you shod start and complete them by.

Check who you need to enrol

Employers are required to carry out a full assessment of all their staff’s workplace pension rights before they reach their staging date.

The rights of each employee between the ages of 16 and 74 are determined by the amount they are paid. You can learn more about those rights by reading this section of the Pension Regulator’s website.

Choosing a pension scheme

If you have an existing scheme for your workforce (perhaps called a ‘stakeholder scheme’) you should check with your pension provider to see if you can use it for automatic enrolment.

The Government has set up a pension scheme called the National Employment Savings Trust (NEST) to accept all employers wishing to use the scheme for automatic enrolment.

This is only one of a number of pension providers the Pension Regulator recommends. So make sure you give yourself sufficient time to research the available options and take professional advice to choose teh right one for you and your staff.

It is worth remembering no one can predict scheme performance in future years, but past perfomance may provide a useful guide. Pay particular attention to the costs of setting up the scheme and the annual charges that will be applied moving forward. These are particularly important when you consider the relatively small amounts of contributions made per individual each year. One has to question the sense of paying a single penny if most of what people invest goes to lining the pockets of the fund providers.

At staging and beyond

At your staging date you will need to identify which members of staff to automatically enrol and which will have a right to join your pension scheme on request.

By this point you will already be expected to know what information your nominated scheme provider(s) wants from you, and you are in a position to collect in and pay over the contributions your staff and you will make to the pension schemes before the deadline your provider(s) has given you.

The Qtac bureau payroll software we operate here at MAAP will help reduce the administrative burden this process all represents, including producing all the template-based correspondence that has to be sent out and collected back in to ensure compliance.

The Pension Regulator also provides some useful template letters if you don't wish to avail yourself of the versions MAAP will provide at the appropriate time. Click here to access the template letters.

Postponing

Although you cannot postpone your staging date, you can choose to postpone automatic enrolment for up to three months for some or all of your staff.

For many employers, the only reason for postponing will be to save 3 months of employer contributions. In the greater scheme of things, the saving at 1% will probably not be worth the extra administrative costs of write to all your staff to tell them you have postponed the automatic enrolment for them.

Opting-out

Employers thinking they can avoid the costs of auto enrolment will find opting-out it is not a solution they can take advantage of at all.

In fact we anticipate opting-out will become the bane of the employer's lot because there are so many legal consequences for failing to make sure any opt-out request received by an employee is handled correctly.

Work with MAAP to make the auto enrolment process worry-free

MAAP will work with you to make the auto enrolment process as painless as it can be

We have already started working with clients as they progress through the auto-enrolment process and we are pleased to report it is not as onerous as one might think. You just have to methodical and organised.

That said, it is important you do not underestimate the extra time involved in the auto-enrolment process. It can take many months to set-up some pension schemes, so leaving it to the last minute is certainly not recommended.

To keep thing sin perspective, a small employer with a few staff could probably process their complete monthly payroll in under a few hours. Most of that time would be probably be spent collecting in the missing information about what hours to process for each employee. A joiner or leave might add an hour or so to the clock.

We anticipate the employers will now spend a complete day a month processing their payroll when they have to deal with work place pensions. Processing a joiner or leaver will take as much time as it needs to fill in the paperwork required by your choice of pension provider. For this reason, the ability to process a joiner or leaver through a secure online portal is a feature you should highly value when making your choice of a pension provider.

Please call us on 01202 482121 to discuss any concerns you may have about the workplace pension scheme and the auto enrolment process.

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MAAP Accountants
Sigma House, 44 Willow Way
Christchurch, Dorset, BH23 1LA
Tel: 01202 482121
info@maap.co.uk