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Pension – Auto-enrolment Explained for Employers

To comply with legal obligations, employers must understand and adhere to Automatic Enrolment duties. Familiarising yourself with both initial and ongoing responsibilities is crucial for ensuring compliance and avoiding fines imposed by The Pensions Regulator (TPR).


This article provides a concise overview of employer duties, including the necessary administrative steps and associated timeframes.


Automatic Enrolment Duties for Employers:


Under the Pensions Act 2008, all UK employers are mandated to enrol eligible employees in a workplace pension and contribute to it. This system, known as Automatic Enrolment, imposes a legal obligation on employers to enrol eligible employees from the first day of their employment. Failure to meet deadlines may result in penalties.

Key Initial Steps for Employers:


  • Choose Employer Pension Scheme: Select a pension scheme for eligible employees, ensuring it is in place promptly.
  • Identify Eligible Jobholders: Assess employees for eligibility on their duties start date, potentially considering deferment based on policies.
  • Communicate with Employees: Inform each staff member about how automatic enrolment affects them. Utilize templates from TPR for timely communication within six weeks of their duties start date.
  • Complete Declaration of Compliance Submission: Submit electronic details about eligible employees to TPR within five months of their duties start date.

Ongoing Auto Enrolment Duties for Employers:


  • Identify Eligibility for Enrolment: Continuously assess whether an employee needs to be enrolled.
  • Communicate with Employees: Regularly inform employees about auto-enrolment implications and next steps.
  • Complete Declaration of Compliance Submissions: Submit necessary declarations for enrolling employees.
  • Make Contribution Payments: Ensure timely contributions are made each pay period.
  • Monitor Eligibility for Future Enrolment: For employees initially ineligible, monitor their earning levels and ages for potential future enrolment.
  • Manage Joiners and Leavers: Handle ongoing requests for joining or leaving the pension scheme.
  • Maintain Records: Keep and maintain employee and pension scheme records for statutory periods.
  • Re-enrolment and Re-declaration: Re-enroll and re-declare for staff members who opted out.

For more detailed guidance on these duties, employers can refer to TPR’s website.


When Do Automatic Enrolment Employer Duties Begin?


Since October 1, 2017, businesses employing for the first time must comply with automatic enrolment upon recruiting a staff member. Prior to this, employers had more time to prepare, with a staging date communicated by TPR. Now, duties commence from the first date an employee works, and employers must promptly seek advice or assistance.


Employers must calculate contributions based on qualifying earnings each pay period. A useful table by TPR summarises the position based on employee categories.


Employee Contributions and Opting Out:


Employers pay a percentage of an employee’s qualifying earnings into their pension pot. The minimum contribution is 3% from the employer and 5% from the employee, totalling 8%. Employees can ‘opt out,’ with a refund for opt-outs within one month. Opt-outs after the first month retain contributions in the pension fund.


Employers may defer auto-enrolment for up to three months through postponement, following necessary guidelines.


Legal Protections for Employee Pension Rights:


Legal safeguards ensure protection for employees’ pension rights, preventing actions or errors that result in cessation of membership or opting out.

Employers failing to meet obligations may face warning letters, statutory notices, penalty notices, and even prosecution with criminal offenses.


Retention of Employee Information:


Employers must maintain records, including employee details and pension scheme information, for a minimum of six years. Suitable documentation software is crucial, and a declaration of compliance submission is required within five months of legal duties commencement.


For re-enrolled staff members, a re-declaration of compliance is necessary every three years.


Conclusion:


Understanding and fulfilling auto-enrolment duties are critical for employers to comply with legal obligations, avoid penalties, and secure employees’ pension rights. Regular reviews of guidelines and maintaining accurate information are recommended to ensure compliance with TPR regulations.

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