Auto-enrolment kicks in
If you employ a nanny, cleaner or carer, you may soon have to set up and pay into a pension scheme for them. The phasing in of pension automatic enrolment has now reached its final phase and, by April 2017, almost every employer will have to take action.
Auto-enrolment applies to employees aged between 22 and state pension age who are paid over £192 gross a week (£833 a month). Although employees can opt out, most don’t. Employees who are not within auto-enrolment, for example those aged under 22, can opt into a workplace pension and the employer must then contribute on their behalf. Initially, employers and employees each contribute just 1% of the employee’s earnings between £5,824 and £42,385 a year in 2015/16. By 2018 this contribution level will rise to 4% for employees and 3% for the employer, with a further 1% coming from tax relief.
Every employer has a ‘staging date’ when auto-enrolment starts for them. The dates have been allocated at random for employers with fewer than 30 staff, so the first thing you must do is find out when your staging date falls, because will need to have your arrangements in place by then. The dates are available from the Pensions Regulator – you will need your PAYE reference.
Well before your staging date you should make sure your staff records are correct, in particular their date of birth, national insurance number and contact details. You will then be in a position to assess whether they fall within auto-enrolment or will be able to opt in. Payroll software will simplify this process, so make sure your software (or payroll agency) fully supports auto-enrolment.
An important task is to select a pension scheme. You can use the government’s National Employment Savings Trust (NEST), or choose another provider. Within six weeks following your staging date you must write to each employee to tell them how automatic enrolment applies to them and what their rights are. The Pensions Regulator provides letter templates to ensure you comply with the legal requirements.
Within five months of your staging date you must complete a declaration of compliance. That is not the end, however. You might take on a new employee, or an existing employee may move into or out of auto-enrolment as a result of changes in age or salary. We will be happy to advise you on getting ready for auto-enrolment and comply with your other obligations as an employer.