Auto Enrolment (“AE”) is a mandatory process, introduced in law in 2012, to enrol all eligible employees into a pension scheme. The introduction of Auto Enrolment is staggered according to the size of a business, and many employers (businesses with over 30 employees) will have applied the auto enrolment rules some time ago.
Under the this regime all employers will be required to provide a qualifying pension scheme to staff and enrol all eligible employees into it (termed ‘Auto-Enrolment’). Employers will also be required to pay a contribution into the pension scheme for the benefit of those employees.
Employers can choose to use an existing scheme, set up a new scheme, use the governments NEST pension scheme, or a combination.
The ‘staging date’ is based on the number of employees within a PAYE scheme on April 2012. Employers with less than 30 employees will have a staging date between June 2015 and April 2017, depending on payroll reference.
Employers without a PAYE scheme or with no employees will come within the auto enrolment rules on 1 April 2017. New employers (where a payroll scheme was set up after 1 April 2012) have a staging date between 1 May 2017 and 1 February 2018. If you are unsure about your staging date then you can check on the Pension Regulator website here.
Eligible workers, who are required to be enrolled, are broadly defined as those aged between 22 and 65, working in the UK with ‘qualifying earnings’ of at least £10,000 per annum (2016/17). Non eligible employees can also ask to be enrolled and all employees have the right to opt out. There are additional complications if a business has more than one PAYE scheme.
In all cases, pension contributions are required from both employer and employee based on a percentage of the employees earnings, as shown below:
|Date||Employer minimum contribution||Total minimum contribution|
|Employer’s staging date to 05/04/18||1%||2% (including 1% staff contribution)|
|06/04/18 — 05/04/19||2%||5% (including 3% staff contribution)|
|06/04/19 onwards||3%||8% (including 5% staff contribution)|
A range of different penalties can be applied. An initial breach of the law may incur a fixed penalty of £400; further non-compliance could incur daily penalties related to the size of the business as shown below:
|Number of employees||Prescribed daily rate (£)|
|1 – 4||50|
|5 – 49||500|
|50 – 249||2,500|
|250 – 499||5,000|
|500 or more||10,000|
Further penalties, civil action or criminal prosecution are possible.
If you have any questions on the above or for payroll advice in general please contact our Tax Director, Jenny Marks.
To see our other news items please visit our Muras Baker Jones – Blog.