We are already a year into the 5-year process of bringing ALL employers in the UK within the auto-enrolment regime. This places obligations on employers to provide a workplace pension for their employees AND to contribute into it. The very largest companies are the first to implement, but it’s not long now before auto-enrolment is going to hit the very smallest of companies also – and I predict that there are some challenging times ahead….
All employers have a staging date – the date by which they are legally required to have a qualifying pension scheme up and running. For employers with fewer than 50 employees, the staging date will be between 1st June 2015 and 1 April 2017, dependent on post-code. This is less than 2 years away, and, given the potential administrative effort, not to mention the fact that pension advisers / IFAs are bound to get inundated by requests to assist, early planning has to be recommended! If you do not know your own staging date yet, look it up here -
Auto-enrolment will affect all employers who employ staff aged between 16 and 74, earning at the lower earnings limit or above (for the current tax year this is £5668) in the UK. As well as providing a qualifying pension scheme, employers will be expected to make employer contributions into the scheme on behalf of all those employees who do not opt out of the arrangement. Those contributions will ramp up gradually, but if you have a later staging date, the speed of ramp-up will be greatest – see here: (this assumes employers make the minimum contributions possible:
|Date||Employer minimum contribution||Total minimum contribution|
|Employer’s staging date to 30 September 2017||1%||2%|
|1 October 2017 to 30 September 2018||2%||5%|
|1 October 2018 onwards||3%||8%|
Undoubtedly auto-enrolment is going to be a hot topic for small businesses over the next couple of years. And it will pay to plan well and budget for the costs involved. Anticipate costs as follows:
- Your compulsory employer contributions – the largest cost over time
- The cost of preparation (time)
- The cost of seeking expert advice
- Pension scheme set-up fees and ongoing maintenance charges
- Ensuring that your software and systems (e.g. payroll software) can handle auto-enrolment
- The costs of handling auto-enrolment and opt outs from both new and existing employees once the scheme has started
As auto-enrolment approaches for our small business clients, we will endeavour to provide support where we can. But the key to a successful implementation, as with most things, is prepare well and early!