A vast amount of big companies have been taking part in Auto-Enrolment for a couple of years now. In some countries like Australia, they already operate something similar to the Auto-Enrolment scheme, which has also been running for many years. The scheme encourages employers to take care of their employees and for people to put some money aside for their retirement.
Auto-Enrolment is related to your payroll costs. If you are running payroll at the moment you should be aware of the deductions such as income tax which is also known as PAYE or National insurance. However, if you have a pension contribution as well that is another deduction. Even though it is being deducted, the money paid into your pension scheme will still be yours afterwards which will be of benefit to you. The scheme is applicable for all businesses as long as you have employees.
What is Staging Date
If you are on a PAYE scheme, the pension regulator will pick up that information automatically and send you a letter confirming your staging date, which is the duty start date. Once the staging date commences you will need to automatically enrol the workers to the pension scheme.
If you are the only company director and have no other employees, the duty does not apply to you. You are able to voluntarily contribute to a personal pension as the decision is entirely up to you. Also, if you are company director but have other employees, you don’t have to enrol yourself into the pension scheme if you don’t want to.
2 Important Triggers to Take into Account
On the other hand, if you have employees then you have two factors you need to consider. The first is the earning trigger and the second is their age.
· Earning Trigger – Per month, the earning trigger is £833. If someone is earning £900 per month and they are aged 23 then at the company’s staging date, the employee needs to automatically be put into the pension scheme.
· Age Trigger – From the age of 16 to 74, an employee has the right to enrol into a pension scheme. But if the employee is between the age of 22 up until the state pension age then it is highly likely they have to be enrolled automatically. For the employees that are aged between 16 to 22, they have the choice of whether they want to be enrolled or not.
Until April 2018, employees contribute 1% of their pay cheque to a pension scheme and the employer contributes 1%, overall there is a 2% contribution but it will increase in later years.
Is the Staging Date the Start Date for The Pension Contribution?
If you are running the payroll monthly, the last working day of the month after your staging date is the day that you have to show the deduction on the payslip. For example, if your staging date is 1st August 2017, you would need to show the deduction on 31st August 2017 which is the last working day.
Where to Find Comprehensive Guidance Online
Most small businesses do not have enough knowledge on the benefits of contributing to a pension. If you are someone who needs more information, you are able to get more guidance from NEST Pension website. NEST also offers one of the pension schemes which you can choose from. Bigger businesses might go for other pension providers to set up the workplace pension for them and have specific educational training from the provider, but for small businesses NEST Pension might be the only option available.
What About Family Businesses?
There are cases where there are family businesses operating where one family member is the director and they have a spouse or children working for them. If your family members are employees, this duty will also apply to them. You do need to check your staging date and be aware of the steps you need to take to make sure everything is compliant.
What If an Employee Does Not Want to Be Enrolled?
It is important to note that as an employer you cannot force your workers, who are entitled to the pension, to get out of the pension scheme. It is up to the employees to make the decision for themselves. There is an opt out period for the employee, which is one month from the date he/she is enrolled. If there has been a deduction previously, and they do decide to opt out they are able to get a full refund. In order to validate the opt-out process, the employee would need to give you a notice and request a notice form from the pension provider. Re-Enrolment into the pension scheme is carried out once every 3 years, employees that have opted out will be put back in which means they would need to opt out again.
Things You Need to Do Prior To Your Staging Date
1. Work out your payroll costs
2. Assess your workers
3. Communicate with your workers
4. Decide which pension scheme to go for
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