Pension auto-enrolment and your duties as an employer
All employers will have to enrol worker in a pension scheme and both will have to make contributions. A worker can opt out and if they do so, no contributions need to be made.
It is now an offence to persuade a worker to opt out of a pension scheme or to offer employment on the understanding that they will do so. An example of this might be telling a worker that they can choose between a pay rise and a pension contribution.
The regulations are complex and the penalties draconian for not getting it right. For example even the smallest firms can be fined £500 per day if things go wrong.
Find out your staging date
The new workplace reforms do not apply to all employers at the same time but will be introduced gradually. The first point of action for each employer is to find out when it will affect them.
Each individual employer has been allocated a staging date, based on the number of people in their PAYE scheme. Larger firms start from 1 October 2012; medium sized employers next and then smaller employers from 2014 to 2017. The Pensions Regulator has published the staging dates on its website.
Even if your staging date is a while off you still need to be aware of your statutory duties and make plans to ensure you will be ready at the appropriate time. Remember these dates are deadlines that cannot be extended and very severe penalties will be imposed for non compliance.
The employer’s duties
When your staging date arrives you will have to:
- Provide information about the pension scheme and the individuals rights and obligations
- Make arrangements to enrol your workers in a suitable pension scheme
- Contribute to the pension scheme
- Deduct the worker’s contributions from their pay and send it to the pension provider
- If a worker opts out of the arrangement you have to refund contributions and then,
- Enrol them back in to the scheme after three years
- Enrol new workers at the correct time
- Provide information to workers and the Pensions Regulator
- Keep extensive records
All of this will take time to put in place. You should start to plan at least 12 months before your staging date. Remember there are penalties if you miss your deadline.
Don’t be fooled
Many businesses think that Auto-Enrolment is “a pensions issue”, it’s not. Really the pension side of Auto-Enrolment is just the tip of the iceberg and its the 90% compliance that is likely to catch many employers out, and with penal fines and the threat of a criminal prosecution isn’t something that (in our opinion) should be taken lightly, and don’t assume that your payroll software will cover all of your responsibilities either, it wont!
For more information on Auto-Enrolment or deatails of our comprehensive Auto-Enrolemnt compliance systems, contact your local Burgis & Bullock office on 0845 177 5500 or using our on-line form.