20/07/2015

By Shaz Nawaz, Director, AA-Accountants

If you’re among the thousands of small and medium-sized enterprises (SMEs) who haven’t yet reached the point of mandatory auto-enrolment in a workplace pension scheme, you may well be thinking that there’s plenty of time to get this in place. Be warned – it’s later than you think!

Tip 1 – start in good time

Hopefully you’ve already found out your staging date. This is governed solely by the first two letters of your PAYE scheme reference. If you don’t pay your workers through a PAYE scheme then your staging date is 1 April 2017. You can find out your staging date by visiting http://thepensionsregulator.gov.uk/employers/know-your-staging-date.aspx

You need to start making the arrangements 6 to 12 months before your staging date. You must nominate someone to be the point of contact with HMRC. Do this about 12 months before your staging date.

Tip 2 – don’t misunderstand the optional three month deferment period

You don’t have to enrol your existing workers until three months after the staging date. But you do have to have the pension scheme in place on the staging date, otherwise you’ll be charged a penalty. After that, you can defer auto-enrolling any new employees for up to three months from the start of their employment. Employees can choose to opt-in within those first 3 months if they choose.

Tip 3 – know who you have to auto-enrol

Your legal obligation is to carry out a full assessment of all staff on the staging date – but don’t leave it until then. An employee’s pension rights are governed by age and level of remuneration – nothing else. Any employee aged between 22 and state pension age with gross earnings of over £833 per month or £192 per week must be automatically auto-enrolled. Other employees may have a right to opt in, or to require you to provide a pension scheme for them without employer contribution.

Tip 4 – auto-enrolment doesn’t apply just to regular employees

Directors are employees too! A sole director does not have to auto-enrol, as long as there are no other staff, but where there are two or more directors, then auto-enrolment applies to all of them if more than one of them has a contract of employment.

An employee works under a contract of employment (or at the least a written statement of the main terms of employment – a legal requirement). But the term ‘worker’ includes not only employees, but also anyone who works under a contract which obliges him or her to provide services personally, often referred to as a ‘contract of service’, and such an arrangement will mean that the worker qualifies for auto-enrolment in the same way as an employee. Only the genuinely self-employed will be exempt.

You don’t have to be a business! If you employ someone to help you with your care or provide personal assistance, then auto-enrolment applies to you, even if you’re using money provided by the local authority (but if the carer is provided by an agency who pays the carer’s NI, then it’s the agency who is the employer, not you).

Tip 5 – what if none of your staff want a workplace pension?

Tough – you still have to have a pension scheme in place and auto-enrol all qualifying employees. They can then opt out if they wish. The only time you don’t need to set up a pension scheme is if there are no qualifying staff.

Trying to influence employees to opt out is against the law!

Tip 6 – what about employees who are leaving?

If they give notice, or you give them notice before you have completed the auto-enrolment, it’s up to you whether you auto-enrol them or not.

Tip 7 – what if you already have a pension scheme?

Provided the scheme meets the requirements of a qualifying workplace pension, then there’s no need to change it. However, if you don’t want to offer this scheme to all employees who qualify for auto-enrolment (maybe because it has other benefits which are only available to certain employees) then that’s OK – just set up a new qualifying scheme for the remaining qualifying employees.

Your pension adviser, or pension provider will be able to tell you whether a scheme qualifies – aim to get this information at least 6 months before your staging date.

As usual – forward planning is vital. It’s best to draw up an action plan now, working backwards from your staging date, to avoid running out of time!