When Employers Need to Enrol their Staff
As a rule, deducting tax and National Insurance contributions from the wages of an employee makes you an employer (check below).
Employers must enrol and make a contributions for all staff members:
- Aged between twenty two (22) and State Pension age.
- Earning over £10,000 a year (£833 a month, £192 a week).
- Working in the United Kingdom (including people based in the UK who travel overseas for work).
Your staff can also become eligible for ‘automatic enrolment’ because of certain circumstantial changes (e.g. they get older or their earnings increase).
When this happens, you must add them to your workplace pension scheme. You would also need to inform them in writing no later than six (6) weeks of the day that they became eligible (e.g. met the criteria).
Important: There is no legal requirement for employers to enrol employees in an occupational pension scheme if they can provide a lifetime allowance protection certificate (as proof).
Setting Up Your Pension Scheme
You have become an employer once you employ at least one person. As such, and according to the Pensions Act 2008, you would need to place certain staff members into a workplace pension scheme – and make employer’s contributions towards it.
Employers can get further information about workplace pension duties as part of ‘automatic enrolment’ on The Pensions Regulator website.
Note: Your pension provider would be able confirm whether an existing company pension scheme that you use for automatic enrolment meets the rules.
Paying Employer’s Contributions
If you employ any eligible staff, you will need to pay (contribute) a minimum of 3% of their ‘qualifying earnings’ into their occupational pension scheme. Different pension schemes have varying amounts counting as ‘qualifying earnings’.
As a rule, your employee’s total earnings (ranging from £6,240 up to £50,270 per year before tax) would count as total earnings. The amounts usually include:
- Salary or wages (including bonuses and commission)
- Statutory Sick Pay (SSP)
- Statutory Maternity Pay (SMP), Statutory Paternity Pay (SPP), or Adoption Pay
Employers need to deduct employee contributions from their staff member’s pay each month. The amounts need to be paid into the staff’s pension scheme no later than the 22nd day of the following month (or the 19th if paid by cheque).
The contributions for each employee need paying no later than the date agreed with the provider (e.g. each time you run payroll). Furthermore, you would need to backdate any missed pension payments.
Important: Making late payments (or failing to pay the minimum contribution for each staff member) can result in a financial penalty.
Managing a Workplace Pension Scheme
After setting up a workplace pension scheme, you will need to manage it too. Hence, your ongoing legal duties will include:
- Checking whether your staff need to be re-enrolled (and when).
- Keeping accurate records showing how you met your legal obligations and duties (see below).
- Managing any requests by staff to join or leave your company pension scheme.
- Checking whether existing staff need adding to your pension scheme (e.g. when their pay increases).
Re-Enrolment and Re-Declaration
Employers need to re-enrol staff into the pension scheme every three (3) years following the date when the first member of staff started working, if:
- The worker left the pension scheme more than twelve (12) months before the re-enrolment date. You can check your key dates for re-enrolment online.
- The staff member remains in the pension scheme but they pay less than the minimum contributions level.
What if a staff member left the pension scheme twelve (12) months or less before the next re-enrolment date?
In this case, you can choose whether to re-enrol them on that particular date or you can wait until the next re-enrolment date (e.g. in three years’ time) providing they still meet the eligibility criteria.
Employers must write to all eligible staff no later than six (6) weeks after the re-enrolment date. The letter must inform the worker that you put them back into your workplace pension scheme.
Furthermore, you must complete your re-declaration of compliance by your deadline and every time you carry out your re-enrolment duties (to avoid getting a fine). You need to carry out this task even for staff members who were not re-enrolled.
Note: The Pensions Regulator has a tool for finding key dates for re-enrolment (e.g. putting staff back into your scheme).
Getting Requests to Join Your Pension Scheme
In most cases, you will get some requests from staff members to join (or to leave) your pension scheme. If this happens, you must check their eligibility to join and then place them into the scheme no later than one month of receiving the request.
Likewise, you have one (1) month to take staff members out of your company pension scheme – if they make a request to leave it.
Staff can ask to leave a pension scheme within one month of joining (e.g. during the ‘opt-out window’). If this happens, you would need to refund their contributions within one month. Asking to leave the scheme after the opt-out window expires means their contributions would remain in their pension pot until they retire.
Maintaining a Workplace Pension Scheme
Employers need to keep proper records of how they are meeting their legal duties for maintaining their pension scheme. Thus, the records must include:
- Names and addresses of staff members enrolled in the scheme.
- Dates of contribution payments (paid in).
- Your unique pension scheme reference or registry number (PSR).
- All staff requests to join or to leave the pension scheme.
- Staff members ages and earnings (to enrol them upon eligibility).
Note: Employers must keep workplace pension scheme records on file for six (6) years. But, requests to leave the scheme only need to be kept for four (4) years.
Check if You Qualify as an Employer
Millions of people have become part of the automatic enrolment process and now have money saved in a workplace pension.
So, how do you check if you’re an employer and whether you need to follow automatic enrolment rules? Generally speaking, the following factors indicate you have employer status:
- Your duties include finding work for someone and you can tell them what to do and how to do it (even if they carry out the work unsupervised).
- You are providing any necessary tools for a worker to perform a task (e.g. do the job).
- You are paying someone on a regular basis for the hours they work rather than when they have completed a particular job.
- Your worker has entitlement to benefits (e.g. sick pay, maternity pay, paternity leave). As a result, you would need to find someone else to perform the work if they are unable to do so.
- You pay them directly through the PAYE system and give them payslips to show how much they earned.
Note: The main section contains a law guide for people management and the essential things you and your organisation need to consider when hiring workers.