By Rich Preece, UK VP and Managing Director, Intuit
As a small business owner, you will likely go through your Auto-enrolment staging date at some point over the next 12 months. As a result, it’s important to understand what Auto-enrolment is so you can take action now and start planning for the future.
Auto-enrolment, also known as workplace pensions, is a Government initiative that requires businesses in the UK to automatically enrol employees into a workplace pension. This means that at some point your business will have to comply. While this administrative task may appear daunting, there are many things you can do as an SME owner to eliminate any potential burdens and start the preperation for your staging date. This will enable you to concentrate on the serious job of making your business a success.
Below, I offer advice on what you can do now to ensure your Auto-enrolment staging date goes smoothly.
Make sure you understand how Auto-enrolment will impact your business and employees
Auto-enrolment requires each business in the UK to provide their staff with a pension scheme. How your workforce joins the scheme is dependent on meeting particular criteria, discussed further below.
By 2018, all organisations in the UK need to have met the legal duty to provide a pension for their staff. Employees do reserve the right to ‘opt out’ of enrolment, as some may have their own pensions and don’t want to contribute towards both. In these cases, it’s important to note that your workers can opt back in to the scheme if they choose to, subject to the pension scheme rules. This area must be handled sensitively and communicated accurately, as you could be accused of breaking the law if you encourage any employee who qualifies for Auto-enrolment to opt out.
Compile employee information and identify when your staging date will take place
Once you understand what Auto-enrolment is, the first step for your business is to find out when you must start putting your employees into an automatic enrolment programme and begin contributing to their pensions. This starting point is the ‘staging date’. You can find out your business’ staging date by visiting The Pensions Regulator’s website. The next step will be to work backwards from this date to the present and create a plan that allows you to hit your deadlines.
Assessing your workforce should be a part of this plan, so make sure you have all your employees’ vital information at the ready. This includes their full name and contact details, their National Insurance number, PAYE details, date of birth and salary. Employees who fall outside of the ages of 22 to State Pension Age and earn less than £10,000 per annum will not be auto-enrolled into a workplace pension scheme. Instead, they will have the option to ‘opt-in’.
Some pension providers may also require additional information such as the addresses and emails of your employees. Getting all of this information together now, ahead of your staging date, is one way that you can make your Auto-enrolment process run easily.
Get on top of your finances
From October 2017 onwards, the minimum total contribution to a pension will be 5% with you, the business owner, paying 2% and the remaining 3% coming from the employee and tax relief. However, after October 2018, the minimum total contribution will rise to 8%, with your payment increasing to 3%. As a result, it is more important than ever to get on top of your finances to make sure you have a complete overview of what’s coming in versus what’s going out. This will enable you to plan ahead for the additional expenses you may incur as a result of Auto-enrolment.
Your staging date is only really the beginning of the Auto-enrolment process. The ‘auto’ in Auto-enrolment relates to your employees not having to worry about doing anything to be included into your pension scheme. The onus is therefore on you to ensure the process goes ahead smoothly.
While this may seem daunting, there are a lot of resources available to help you navigate Auto-enrolment and ease the administrative task. One of the most important resources at your disposal is your accountant, who can not only take care of your bookkeeping, but also advise you on critical business decisions to get your finances in order and prepare you to make contributions each month into your employees’ pension scheme. Additionally, ensure you have the right tools in place to assist you in setting up an Auto-enrolment process and reminding you when to complete certain tasks in order to remain compliant.
Armed with the right information and third party support, you can stay ahead of the workplace pensions curve. By drawing on the sources available, you will be able to easily go through the Auto-enrolment process and concentre on doing what you love – starting, running and growing your business.