Auto Enrolment – The basics for employers

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The Auto-enrolment process can be daunting for employees and employers alike, it’s complicated, heavily legislated and full of questions!

In this article, we will outline the basics of auto-enrolment – Who is eligible, minimum requirements & more.

Remember this is just a guide and rules and regulations constantly change, for more information on any aspect of Auto-enrolment please call our team on 01622 671199

What is Auto Enrolment

Auto-enrolment is an important process that all employers should be aware of. The process forces employers to automatically enrol their employees in a workplace pension plan.

What this means for an employee

A percentage of earnings are deducted from wages. Payments are then paid into a regulated pension fund which can be accessed after retirement.

What this means for an employer

Employers must also contribute to the fund each month, allowing all workers to build a pension pot.

Who is eligible for Auto-enrolment

All UK employers are required to take part in the auto-enrolment process. It doesn’t matter if an employee has just started thier first job or is a seasoned pro.

What are the minimum eligibility requirements for Auto-enrolment?

criteria for autoenrolment

Auto-enrolment will apply to your employees if:

The employee is classed as a ‘worker’

According to UK employment laws – someone is classed as a worker if they are:

  1. Working for you under a contract of employment or other arrangements. This can include full or part-time work, at home or away from the office.
  2. The reward for working is payment or a benefit in kind, eg future work or a contract of employment after a probationary period
  3. They are not completing work as a self-employed entity for the business.

The employee is aged between 22 and state pension age

At the time of writing this article, the state pension age is currently under review by HMRC. Based on previous guidelines the age at which you could claim a state pension was 66. This is set to rise to 68 (pending legislation). As a general rule, your employee is between 22 and 66 they will be eligible for auto-enrolment.

Earnings of at least £10,000 per year

This threshold is before tax and national insurance are deducted.

The employee normally works in the UK

Your main place of work is within the UK, this wouldn’t include trips abroad for business-related matters.

What is the workplace pension scheme?

Workplace pensions and workplace savings schemes are a type of personal saving scheme that employers can offer to their employees.

Pension contribution amounts

Representation of percentage contributions

From April 2019 the minimum contributions for a workplace pension are

Employee contributes 5%
Employer contributes 3%

This can be increased by either employer or employee if desired.

What if my employee doesn’t wish to enrol?

It’s important to note that your employee does not have to join the workplace pension scheme. If they choose not to take part they may opt-out.

Once you have enrolled your employee onto the workplace pensions scheme you must notify them in writing. Employees do have the right to opt-out within 30 days of enrolment. If they choose this option:

  • All contributions are cancelled
  • The employer does not need to contribute to the plan.

What pension schemes are available to me?

The pensions regulator has a full list of scheme options. If you have an accountant they will be able to assist you in setting up the scheme and even running it for you each month.

Employer Checklist

  1. Check whether your worker fits the eligibility
  2. Set up a qualifying workplace pension scheme if they are.
  3. Join them onto the scheme and set up contributions
  4. Write to your employee detailing the scheme and the option to opt-out.

further information about the workplace pension scheme & Auto-enrolment can be found online at Gov.uk

If you have just employed someone or are thinking about doing so in the future, the team here at stones are able to assist you with everything from auto-enrolment to payroll.

Contact us below to arrange a FREE consultation.

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