Between 2015 and 2017, over a million small and micro businesses reached their pensions auto enrolment staging date. Since then, nearly 78% of the UK’s workforce has joined a workplace pension. If you’re an employer, you have several legal obligations when it comes to workplace pensions for your employees. But what exactly are they? And why is it so important you stay on top of them?
Who is obligated to provide a pension scheme?
You’ll need to start automatic enrolment for the first time if you’re a business owner who is or is thinking about hiring at least one employee who:
- Is between the ages of 22 and state pension age
- Has earnings before tax of more than £10,000 a year, £833 a month, or £192 a week
You are not obligated to start auto enrolment if you’re freelance, self-employed or your business has one or more directors without employment contracts.
What are my duties as an employer?
If you’re providing a pension for the first time, you must:
- Choose a pension scheme
- Work out which of your employees must be put into the pension scheme
- Write to your staff to alert them of their automatic enrolment
- Declare your compliance to the Pensions Regulator by filling out their declaration of compliance checklist
There are also several duties you’ll have to carry out on an ongoing basis, like monitoring the ages and earnings of your staff to see if you need to add them into the pension scheme and managing requests to join or leave the scheme.
Every three years, you’ll also have to undertake re-enrolment, which is an opportunity for employees who have opted out, ceased active membership or reduced their monthly contributions to re-join the pension scheme. To find out your date for re-enrolment:
- Go to the Pensions Regulator website here
- Enter your business’s PAYE reference. If you’re not sure of this, look on your P6/P9 coding notice or on your white payslip booklet P30BC.
- Enter your 10 digit code – this can be found on the letter you received about auto enrolment or through the Pension Regulator here
You’ll then be given your key dates for re-enrolment.
When do my duties start?
Your duties as an employer start the day that your first member of staff begins working for you. At Tyrrell Accountants, we ensure that all of our clients know exactly when their staging dates for employees are and what they need to do. This is because this information is not just ‘nice to have’ – it’s a legal obligation, and there are some costly consequences if you fail to meet it.
There is a fixed penalty of £400 for any failure to fulfill your legal duties as an employer. After this, your fines can increase at a daily rate of anywhere between £50 and £10,000.
How can I stay on top of my duties?
With the high costs of not fulfilling your pension duties, it’s imperative that you have the software and support network in place to stay compliant and keep things running smoothly. Your most important tool in this is your payroll software. Our blog on payroll and auto enrolment tells you exactly what your software needs to do to help you stay on top of your auto enrolment duties and avoid any fines or penalties.
You’ll also need an accountant who is equipped to handle the complexities of auto enrolment and pensions.
At Tyrrell & Company, we know one little thing slipping through the cracks can have big costs. That’s why we keep all our clients informed on their legal obligations and how they change as their business grows.
Book a session with our payroll team to talk through how Sage or Xero can remove your auto enrolment payroll pain, and for more advice for your small business, check out our new guide on maximizing your opportunity to make a profit.