Pension legislation has changed. Over the last four years large businesses have been meeting their auto-enrolment duties and now it’s the turn of smaller employers. Whether your company employs one worker or 50, over the next few years it’ll have to set up an auto-enrolment scheme. As an HR professional it’s likely you’ll be part of setting this up and managing it.
Who does auto-enrolment apply to?
You’ll need to look at your workforce as a whole and place your workers into groups.
The first group are ‘eligible jobholders’. They are those:
- Not already in a qualifying pension scheme at work
- Over 22-years-old but under state pension age
- Working in the UK
- Earning more than £10,000 per year (this figure is reviewed by the government each tax year
If they’re eligible you’ll have to auto-enrol them into a scheme and pay minimum contributions on their behalf. Minimum contributions stand at 2% of a worker’s qualifying earnings, but over the next few years this percentage will increase.
However, even if your employees aren’t eligible you may still have to offer them a scheme. Some people are classed as ‘non-eligible jobholders’ and they are those:
- Over 16-years-old but under 75
- Working in the UK
- Earning more than £5,824 in a year
If they’re a non-eligible jobholder they can ask to be enrolled into the workplace pension scheme and their employer will have to pay minimum contributions.
The final group is called 'entitled workers' and they are:
- Over 16-years-old but under 75
- Working in the UK
- Earning less than £5,824 in a year
If they’re an entitled worker they can still join the workplace pension scheme, but you won’t have to contribute towards their pension pot.
How do we inform staff?
Due to legislation all employers must inform their workers in writing. You can’t rely on an informal chat, a team meeting or a catch-up over the water cooler. The government has set out rules on how you must tell your employees and what you need to tell them.
A great tip for the smaller employer beginning this process is to use the templates on the NEST website; they help organisations comply with auto-enrolment legislation and they’re totally free.
When we’ve enrolled our workers is that it?
No – it isn’t a ‘one and done’ exercise. Firstly, you need to make auto-enrolment part of your HR and payroll processes. You need to work out who is eligible and calculate their contributions every pay period.
Secondly, although opt out rates have been considerably low, with less than 10% choosing this option, some employees may decide they don’t want to be in a pension. It may be that their circumstances aren’t right at the moment. But they get chances to review this as they must be re-enrolled every three years.
But what if there are more questions?
Working in HR often means the questions come your way, but if you don’t have all the answers don’t worry. The NEST website is a great source of information.
Paul Budgen is director of business development at NEST Corporation
