One of the important things that you need to do as an employer is to set up a pension scheme for your employees and automatically enrol all eligible employees on to it. You also have to enrol non-eligible employees if they ask to join it. In fact, the only time that you do not have to set up a pension scheme is if you have no eligible employees, and nobody asks to join it either. So, the result is that almost every employer must set up a pension scheme. This applies even if you only have one eligible employee, so if you have a business, you are very much involved in auto enrolment pensions administration.
An eligible employee, under the Pensions Act 2008, is any employee in the UK aged between 22 and the state pension age and earning over £10,000 a year. All employers have a duty to auto enrol eligible employees from the day that they take on their first employee. That is known as the Duties Start Date.
A non-eligible worker is one earning above £10,000 per year and aged between 16 and 21 or aged between state pension age and 74, or is earning between £6,136 and £10,000 per year and is aged 16 - 74. An employee aged between 16 and 74 and earning less than £6,136 a year is an entitled worker and can ask to join the scheme: if this occurs, he or she must be enrolled but you, as the employer do not have to pay a contribution.
Already, you can begin to see how complicated auto enrolment pensions administration can become. So you could, for example, only have one or more entitled workers on your payroll and if one of them asks to join the pension scheme that you do not yet have, you have to set one up. Eligible workers must be automatically enrolled, but they can ask to opt out. They can’t opt out before they have been enrolled but must opt out before a deadline that is detailed on their auto enrolment notice. If they do that, then they are entitled to receive a refund of any contributions that they have paid in so far.
If the employee opts out after the deadline, he or she will not receive a refund, but can stop paying any further contributions. If the employee opts out, then you, as the employer do not have to pay any further contributions either. However, the employee can choose to opt in again later if he or she wishes! So, you start all over again.
It gets even trickier. Every three years, you have to re-enrol any employees who have previously opted out and you have to submit a Re-declaration to the Pensions Regulator. You obviously have to keep a record of those who have opted out, since you will need all the details to re-enrol them once again.
As you might have gathered by now, there are penalties for non-compliance. The Pensions Regulator will issue a warning. If you do not comply with that, the Pensions Regulator will issue another warning and apply a fine of £400. After that, if you still do not comply, there is a daily fine dependent upon the number of employees that are involved. If you only have 1 – 4 employees, the fine is a daily charge of £50.00. This rises incrementally to £10,000 daily if you have over 500 employees.
If you would prefer to do away with all this hassle, then at Pay Check you can join our Auto Enrolment Service and we will run it for you. It’s alleviates the stress and hassle from you. Give us a call for more details.
If you have had enough trying to negotiate the payroll minefield, go ahead and contact our friendly team on 02074981133!