For businesses with 500 employees or less, auto-enrolment is now very real and there are a number of things you will have to do over the coming months to ensure that you comply with this new legislation - or face being fined by the Regulator.
The auto-enrolment process is highly complex. Firms will need to implement a scheme by a particular date, called their “staging date” which is determined by their payroll size in 2012. To do this, you need to assess which employees will need to be enrolled in the scheme and this is based on employees’ ages, wages and opt in or opt out choices.
So – what do you need to do? Once you know your staging date (which you should have been informed bout by HMRC), you will need to start planning – and there’s a lot to do. The Pensions Regulator has published over 250 pages of notes to help employers comply with their new responsibilities, which in essence breaks down into 33 new pension responsibilities for each employer!
To make life a little easier, we have broken them down into five main areas, so here is an overview of your main duties:
- Categorise your workers - you may think everyone should be included in auto-enrolment, but it’s not that simple
- Communications - there are a number of different communications you need to send to different categories of worker at different points in time
- Keep detailed records of opt-ins and opt-outs
- Employees can opt-out
- Employees who aren’t eligible now may become eligible
- Opted out employees may change their mind
- Detailed records relating to all this movement must be maintained and updated at all times
- Manage your payroll - your payroll system will need to ensure the correct contributions are payable for each employee, every time the payroll is run
- Choose a pension plan. You're also expected to select a pension plan and take decisions about which investment choices to offer your employees – decisions that are usually only taken by pension professionals with many years’ experience
There has been a lot of discussion around how auto-enrolment will affect employees and lots of debate around whether employers are ready. The truth of the matter is that there are significant costs and time pressures facing businesses in rising to the challenge of implementing auto-enrolment and, with fines for non-compliance, businesses will also pay the price for getting it wrong.
For businesses that haven’t yet staged, auto-enrolment is fast approaching. It's no longer that bridge in the distance. This is something you have to deal with now but with the right help and support, it doesn't have to be a big obstacle to cross. To ensure you can meet your new requirements, you should consult with a qualified financial adviser – if you don’t have one, we can help. You should initially drop Carrie an email (email@example.com) and she will get back to you on this.
Incidentally, and this is really important, companies whose only employees are officers of the company will be exempt from auto-enrolment. So, if you’re the only employee and are a director, you can breathe a sigh of relief. However, if your spouse is on the payroll and is neither a director nor the company secretary, your company will need to auto-enrol. An idea here, then, would be to appoint your spouse as an officer of the company and cancel or rescind any actual or implicit contract of employment that they may have with the company.