Auto-enrolment is automatic for members of staff, however, it is not automatic for employers who need to takes steps to set-up a pension scheme and enrol their workers onto one. Most workers in the UK must now be auto-enrolled into their employer’s pension scheme. The Government has phased in the obligation for employers to auto-enrol staff since October 2012, with the majority of employers (even those with just one employee) now having reached their staging date.
Here are some frequently asked questions that employers ask us about auto-enrolment at MBM Commercial:
Who needs to be enrolled?
If you have reached your staging date then all ‘workers’ between the ages of 22 to 65 must be auto-enrolled into a qualifying scheme. A worker is defined as an individual who:
- works under a contract of employment (an employee), or
- has a contract to perform work or services personally and is not undertaking the work as part of their own business (this excludes people who are genuinely self-employed). (Please note that contracts do not have to be in writing, there may be an ‘understanding’, or they may be verbally agreed).
Which pension scheme do I enrol with?
You need to enrol with a ‘qualifying’ pension scheme. The key requirements are that the scheme is:
- An occupational or a personal pension scheme
- Is a registered pension scheme
- Does not levy excessive charges against its members.
If you don’t already have a pension provider you can enrol with NEST (the workplace pension set-up by the Government) by signing up online: https://www.nestpensions.org.uk/schemeweb/NestWeb/public/home/contents/homepage.html
You may already have an existing employee pension scheme, and in this case you will need to check that it meets the above criteria to be a ‘qualifying’ pension scheme.
When do I have to auto-enrol staff?
In general, employers should enrol employees in workplace pensions from their staging date. However, they can choose to postpone enrolment by three months if they send a notice to their employees telling them that automatic enrolment has been postponed, and the date to which it has been postponed (please find a template here: www.tpr.gov.uk/letter-postpone). If a new employee starts after the employer’s staging date you can also defer their pension by three months if you provide them with notice.
How much should be contributed?
The Government has set down rules on the minimum amount that should be contributed into a qualifying scheme. Initially, the amount the employer must contribute is 1 percent of the employee's qualifying earnings between £5,824 and £42,385 (2016/17). The total contribution made by employer and employee must be at least 2 percent. The table below shows the minimum contributions as a percentage of qualifying earnings:
To find out more please follow this link: https://www.pensionsadvisoryservice.org.uk/about-pensions/pensions-basics/automatic-enrolment/how-much-do-i-and-my-employer-have-to-pay
What practical steps do I have to take?
Aside from setting up a qualifying pension scheme, you need to make sure that you inform workers that they have been automatically enrolled. You are required to inform them that they have one month to opt-out of the scheme if they so wish. This can be done by writing to staff to alert them of their auto-enrolment (including contributions etc.), and setting out their right to opt-out.
In addition, if your contracts of employment cover pension rights and obligations it is a good idea to insert a new pension’s clause to cover auto-enrolment. In particular it is important to word the contract in such a way that the employee and employer contribution amounts can be varied in the future in accordance with any new legislation. Please get in touch with Hannah or I and we would be happy to provide an appropriate clause for your contracts. Staff should also be alerted to this change in their contracts.
Finally, remember that it is very important that you never prevent workers from joining your pension scheme. It is against the law to encourage or force workers to opt out of the workplace pension. So for example, if an employee opts out of the pension scheme and then wants to join again at a later date you cannot stop them from doing this.
If you have any further questions about auto-enrolment, or any other HR or employment issue, please contact Hannah and Katie on 0845 345 5004 or fill out our online contact form.