What is Automatic Enrolment?
Automatic Enrolement is a system that requires all UK employers to provide a workplace pension scheme to all of their employees. If you are an employer it is likely that you have received a letter from the Pension Regulator about it.
Unfortunately, AE can be a complicated system that you are advised to begin preparing for a year in advance. This can be stressful for employers, especially when you are not sure where to look for advice.
How do I prepare for Automatic Enrolment?
The first thing you should do is decide on the type of pension you will use. Whilst it is an important step, you would soon realise that there are a multitude of administrative and compliance duties to deal with as well. You will need to contact all of your employees to let them know they are being enrolled and you will need to determine which employees must be enrolled and which can be enrolled if they wish.
How do I manage Automatic Enrolment?
When AE is up and running you’ll need to check with employees each pay period, which could be weekly or monthly, to see if they change their mind regarding being enrolled or not. This data needs to be kept for a minimum of six years as well, so it could take up a lot of space.
How do I know who has to be enrolled automatically and who doesn’t?
There are three types of employee as far as AE is concerned, these are Eligible Joiners, Non-Eligible Joiners and Entitled Workers.
Eligible Joiners are employees who are over 22 years old but below state pension age that earn over £10,000 per year in total or pro rata. They have to be automatically enrolled into a workplace pension and receive employer contributions to their pension.
Non-Eligible Joiners are employees who earn between £6,240 and £10,000 per year in total or pro-rata. They do not have to be automatically enrolled into a workplace pension but must have the right to ask to be enrolled if they wish and receive employer pension contributions
Entitled Workers are any member of staff that earns less than £6,240 per year total or pro-rata. They need to be informed that they have access to the pension scheme, but will not necessarily get employer contributions to it.
It sounds very complicated and I still have a lot of questions
Unfortunately, as mentioned above, this is a big topic, too big to fit into one of our blogs. In addition, we are not experts with pensions or automatic enrolment.
More information can be found on the pensions regulator website which contains lots of valuable information on AE. This includes when your staging date is and a step by step guide.
If you do require more information or assistance with the above, or with payroll accounting in general, please do not hesitate to contact us.
Adam is our managing director and a fully AAT-certified accountant. Adam founded Short Accounting in 2014 with the aim of helping business owners with their accounting and tax needs so that they can focus on growing and managing their businesses.
Over the years Adam has helped thousands of SMEs, sole traders, limited companies and more with the full range of accounting services. He’s a firm proponent of adopting the latest in accounting tech to help streamline processes to ensure that all of our clients get the best service possible.
