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Auto Enrolment is about to hit its peak with over 500,000 small and micro employer set to stage in 2016. With this high volume of micro employers staging early next year, it is important to know whether or not Auto Enrolment applies to your clients.
If your client has at least one member of staff who is paid via a PAYE scheme, Auto Enrolment duties will apply. The only exeption when Auto Enrolment duties does not apply is when a company or individual are not considered to be an employer.
You won’t have any duties if you meet one of the following criteria:
● you’re a sole director company, with no other staff
● your company has a number of directors, none of whom has an employment contract
● your company has a number of directors, only one of whom has an employment contract
● your company has ceased trading
● your company has gone into liquidation
● your company has been dissolved
Automatic enrolment will apply if more than one director has a contract of employment, be it a written or verbal contract. You can find out more about Automatic Enrolment for Directors here.
What if Auto Enrolment does not apply to my clients?
If your client receives a letter which includes their staging date and you believe that auto enrolment does not apply to them, you or the employer need to notify the Pensions Regulator.
To inform the Pensions Regulator, you must fill out an online form with your client’s PAYE Reference and Letter code. Notify the Pensions Regulator here.
Once you have notified the Pensions Regulator, you will receive a confirmation email and your client will no longer receive any further communications.
Change in Circumstances
Your client’s circumstance will change if a new member of staff is taken on other than a director, or if at least two directors started working for them under contracts of employment.
If this occurs, auto enrolment will now apply to your client and the employer, or you on their behalf, must notify the Pensions Regulator of the change.
However, if you do have auto enrolment duties to perform it will make it easier if you have suitable payroll software in place to automate the AE duties. BrightPay is a payroll solution that is free to employers with up to three employees or the bureau licence has unlimited employees and employers. Why not try our free 60 day trial to find out for yourself ?
Written by Rachel Hynes for BrightPay Payroll and Auto Enrolment Software
The Pensions Regulator continues to try to inform employers about their new automatic enrolment (AE) duties. There is so much information available it has lead to much confusion. For employers, there is no getting around AE either. It is here to stay whether you like it or not. Employers that have at least one member of staff now have specific, mandatory duties to perform. This includes enrolling those employers who are eligible into a workplace pension scheme and contributing towards it. There are also some duties that need to be completed for non-eligible and entitle employees.
Another consideration for employers is whether you have the time or staff resources to deal with AE in-house or outsource this to a payroll bureau or accountant?
Confused? Join BrightPay for a free webinar where we will take you through our step-by-step guide to automatic enrolment has been designed to help employers understand the processes involved in completing their automatic enrolment duties.
One of the subjects on the webinar will weigh up the advantages of processing auto enrolment in-house or will you look to outsource this job to an accountant, bookkeeper of bureau? See the webinar agenda below.
• Auto Enrolment Overview
• Staging dates
• Assessing Employees
• Option of Postponement
• Handling Opt-outs and Refunds
• Supporting Employee Communication
• Recording and Providing Reports
• Integration with various Pension Providers
• Payroll Software
• Process AE in house or outsource
Register here today
Don’t worry if you can’t make it on the day we will record the webinar and send it to you after the webinar, along with any questions and answers that were discussed on the day. By registering your details for the event we will automatically send the information to you.
Not every employee will want to be in Auto Enrolment, for example they may have their own pension arrangements.
But be very careful that you don’t induce or encourage them to opt out.
Most employees will want to be IN
Once staff have been enrolled into the pension scheme, they have one calendar month during which they can opt out and get a full refund of any contributions. This is known as the ‘opt-out period’. It starts from the whichever date is the later of:
- the date active membership was achieved, or
- the date they received your letter with the enrolment information.
Staff can’t opt out before the opt-out period starts or after it ends. If they decide to leave the scheme outside this period, they will instead be ‘ceasing active membership’. Whether they get a refund of contributions will depend on the pension scheme rules.
Staff opt out by giving you an ‘opt-out notice’. The opt-out notice is provided by the pension scheme. This is to avoid any employer involvement in the decision to opt out, which could lead to a breach of the law.
If an employer does anything to encourage or induce an employee or potential employee (at interview) to opt out they will be subject to harsh penalties.
If an employee does Opt Out they will be re-enrolled every 3 years.
You can choose to postpone automatic enrolment for up to three months for some or all of your staff. You must write to your staff to tell them you’re postponing automatic enrolment for them. One of the times you can postpone is from your staging date.
- You can postpone automatic enrolment for up to three months from certain dates.
- If you postpone from your staging date, your staging date does not change.
- If you choose to postpone from your staging date, you must write to tell the staff who will be postponed within six weeks of your staging date.
- Its unlikely that your payroll processing period will match your staging date, most staging dates are the 1st of the month but many payrolls are weekly, it makes sense to start auto enrolment on a pay processing date
- If you have short term staff or you are a temp agency you will probably postpone in order to avoid unnecessarily assessing staff who will leave within the postponement period
- You may also postpone to reduce auto enrolment pension payments and admin
- You can choose any business reason
When can you postpone?
You can only postpone automatic enrolment from:
- your staging date
- a staff member’s first day of employment
- the date a staff member first becomes eligible for automatic enrolment.
If you postpone from your staging date, it doesn’t change your staging date.
Staff whose automatic enrolment you’ve postponed can choose to opt in to your pension scheme during the postponement period.
The Pension Regulator has further details
Don’t mess this up, if you don’t get postponement right…..
- You will get a Warning
- Followed by a penalty of £400
- Followed by fines of £500 to £2,500 per day (depending on the number of employees)
Even the smallest business will get fines of £50 per day!
You will initially be given a warning, which will be followed by a fixed penalty of £400. Not too severe so far, but then the penalties shoot up for those companies who still fail to comply.
If you employ between 50 and 249 employees the fine for on-going non-compliance is a whopping £2,500 per day. For businesses with fewer employees, between five and 49 the penalty is still £500 per day and even the smallest of businesses will be fined £50 per day.
Your staging date is the date the new duties come into force for your business. It’s the date from when automatic enrolment activities must become ‘business as usual’, just like real-time PAYE.
Auto Enrolment isn’t easy, there is a lot to do before you Stage, here is a checklist (Pension Regulator) of activities you should do 6 months before Staging
- You can change your staging date to a later date if you:
- had fewer than 50 staff on 1 April 2012, and
- had, or were part of, a PAYE scheme that has more than 50 people in it.
All employers are able to bring their staging date forward. You may choose to do this to align it with other business practices, like the start of your financial year.
Or you might have several employers in a corporate group and want to align the smaller employers’ staging dates with the largest. If you plan to do this, you must notify The Pensions Regulator, which you can do online.
You can postpone assessing your workforce for up to 3 months, but this does not change your staging date and staff can choose to opt in during the postponement period.
A survey by AutoenrolSME found that 6 out 10 businesses can’t cope with the preparation for Auto Enrolment and hired additional staff to manage the process!
A Poll in April 2014 of 200 businesses with 62 to 249 employees found:
63% of the employers didn’t know when their staging date was!