Guide to Auto-enrolment
Our approach to Auto-enrolment advice is based on clearly understanding a company’s financial situation, their administration processes and what they are prepared to put in place for their employees.
The guidance we will give helps them through this process and means we can make sure our solutions are right for each particular company.
Who will Auto-enrolment apply to?
Every employer is required to have a workplace pension scheme in place. They will also have to automatically enrol certain workers into that scheme and make contributions on their behalf.
All new companies established after 1st October 2017 will be required to meet the requirements from the date of incorporation known as the Duty Start Date.
Understanding your company
To enable us to advise you appropriately we need to gather certain facts about your company e.g. number of employees, affordability and your aims and objectives. We will also ask about your views on staff benefits.
We will then consider the structure of your staff to ensure you are making the correct and most cost-effective method of payment.
Some of the areas we will discuss with you:
• Is there an existing pension scheme in place?
• What level of contributions are you prepared to make?
• What percentage of your payroll is made up of basic salary?
• Who operates your payroll?
Explaining your requirements
Auto-enrolment of staff
All eligible jobholders will need to be automatically enrolled in the selected Scheme. This will be achieved by assessing all staff according to their age and earnings. Jobholders aged from 22 to state pension age and earning more that £10,000 will be categorised as an eligible jobholder.
Jobholders who are under age 22 or over state pension age or earning between £6,136 and £10,000 pa will be categorised as a non-eligible jobholder. They will not be automatically enrolled but will have the opportunity to join and if they choose to join the employer is obliged to contribute.
Any jobholder earning below £6,136 pa will be categorised as an Entitled worker. They will not be automatically enrolled but can choose to join the scheme however the employer is not obliged to contribute.
Communicating with your staff
A letter must be issued to all staff setting out the fact that the employer will be making a contribution to the Scheme and that the employer will also deduct from salary a contribution from the employee.
Postponement
The employer can choose to postpone automatic enrolment for up to three months for some or all of the staff.
They can also elect to postpone new staff members who join the company and staff members who become eligible for automatic enrolment through age or relevant income.
Opting out
Members of staff will be given 30 days to ‘opt-out’ of the Scheme. Details will be included in the letter they receive from the Pension Provider after they have been automatically enrolled. If they opt out within the 30 day period they will receive a refund of any contributions deducted from their wages.
Making contributions
There are two ways of making payments.
Based on pensionable earnings (usually defined as basic salary)
As long as the basic salary payroll exceeds 85% of the total payroll (including bonus and overtime) the requirement is to make a %age contribution based on basic salary as follows:
Employer Employee
From Staging Date to April 2018 1% 1%
From April 2018 to April 2019 2% 3%
From April 2019 3% 5%
Based on banded earnings
If using this method, the %age contribution is based on total earnings for each employee based on banded earnings (£6,136 to £50,000 for 2019/20) as follows:
Employer Employee
From Staging Date to April 2018 1% 1%
From April 2018 to April 2019 2% 3%
From April 2019 3% 5%
The decision as to which method to use will be determined by the structure of your staff and pay. We will assist in making this decision.
What happens next?
If you want to proceed further in receiving advice regarding Auto-enrolment it will be necessary to meet to start the process.
We will then prepare our report with recommendations. This report will also outline the fees payable. If you decide to proceed with the recommendations we would then complete the required documentation