Auto Enrolment and Workplace Pensions

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If you operate a PAYE scheme and employ at least one person you must assess their eligibility for a workplace pension scheme.

As an employer you have duties to ensure you are compliant with the pension’s regulator.

All eligible employees must be enrolled into a qualifying workplace pension scheme.

The employer is responsible for:

All eligible employees are enrolled into the scheme
Pension contributions are deducted from the employees
All Employer and Employee pension contributions are paid over the provider on a timely basis
Submitting a declaration of compliance to the pension’s regulator every three years
Ensuring at least the minimum statutory deductions are paid over to the pensions regulator, these rates are subject to change every year.

Since the introduction of this new legislation in 2010 businesses have effectively increased their employees pay as the employer contribution into the pension started at 1% of qualifying earnings and has increased to 3%.

Many business owners may not have understood the financial impact of this extra cost.

Auto enrolment is effective for all new employers from the date they set up their PAYE scheme and begin to pay their first employee.

Therefore it would be wise to plan for this extra remuneration when negotiating a salary with the employee. Although they have the option to opt out of the pension scheme if they stay in the scheme the employer will be required to contribute 3% of their qualifying earnings as a minimum.

If you are an existing employer, you may have received many reminder letters from the pension’s regulator warning you of fines payable for non-compliance. The pension duties are legally enforceable and must be complied with or else you will be liable to pay the fines.