An Auto Enrolment Pension Scheme can be Complicated

May 25, 2021

Outsourcing your payroll can make a lot of sense for small to medium sized businesses, because doing payroll in-house involves a lot of time spent by staff who may have been employed for other responsibilities, but now have to learn payroll in addition. This is because, as a business expands, it takes on more employees and the payroll becomes more and more complicated.

This diverts staff away from their other responsibilities and this can have adverse effects on those main responsibilities as well, since they can’t be in two places at once. Juggling payroll with everything else can be tricky. Then there are the various changes in legislation that occur all the time, and having to keep up with them. Operating on outdated knowledge brings a high risk of getting sanctions from HMRC.

This is the very reason why payroll outsourcing companies in the UK like ourselves at PayCheck, exist in the first place. As tax legislation has become more complex, there has been increased demand for specialist companies to take over the whole functions such as payroll. This frees up a lot of time internally for a business and gives business owners peace of mind knowing that everything will be compliant. Often times, doing payroll in house can bring feelings of uncertainty and there can be a higher likelihood of errors.

As a business in the UK, you are also obliged to provide an auto enrolment pension scheme for your employees, unless you are in a position where you do not have any eligible workers and you also have no ineligible or entitled workers who wish to join a pension scheme. This means that most businesses do have to provide a pension scheme, and as one of the foremost payroll outsourcing companies in the UK, at PayCheck we can handle that for you as well.

An eligible worker is anyone over the age of 22 up to State Pension Age (SPA) earning more than £10,000 a year. An ineligible worker is anyone aged between 16 and SPA or SPA and 72 and earning above £10,000 a year OR aged between 16 and 74 and earning less than £10,000, but more than £6,240. An entitled worker is anyone aged 16 - 74 earning less than £6,240.

All eligible workers have to be enrolled on to the workplace pension scheme. They can choose to opt out, but only after they have been enrolled in the first place. However, there are some exceptions, these being an employee with pension protection, directors of a limited company, and partners of an LLP (Limited Liability Partnership).

Ineligible workers do not have to be enrolled but can ask to join if they wish, and if they do so, the employer has to pay a pension contribution. An entitled worker can also ask to join the pensions scheme, but in this case the employer does not have to make a contribution.

Employers have to write to all employees advising them of the automatic enrolment scheme and how they can opt out, and also advise ineligible and entitled workers that they can opt in. You have to write to all staff within six weeks of their employment, but you can elect to postpone auto enrolment for up to three months. You have to advise them of this as well.

You also need to monitor the circumstances of each worker since this can affect their rights. So, for example, a worker earning over £10,000 a year becomes eligible on his or her 22nd birthday and must therefore be enrolled.

All of this information can be complicated and confusing; it is just another thing to worry about for a business owner. Unless, of course, you prefer to hand the whole thing over to us at PayCheck and let us deal with it for you.


This article was written by
The Pay Check Team
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paycheck@paycheck.co.uk

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