Stage set for every employer to sort out its obligations
Louise Williams, senior manager at business advisers RSM McClure Watters, considers auto-enrolment after it emerged that all of the UK’s largest businesses have now passed their staging dates
Eight things you must know are that every employer in the UK will be affected by auto-enrolment – even those paying a salary to a spouse will need to consider their situation.
Employers with NO ONE in the pension scheme do not escape – they will still need to perform many administrative tasks each and every pay reference period.
Employers will need to keep records for up to six years – again, regardless of whether anyone enrols in the pension scheme.
Employers have a pre-set deadline to get ready by – the deadline dates (staging dates) are based upon the number of employees in April 2012.
Every employer must already be compliant by their staging date – this can include having in place a fully compliant pension scheme, ready to accept employees.
There is a lot of work required prior to staging dates – preparing for staging will require a significant amount of time and resources and it is recommended that employers begin at least six to nine months before their staging date.
Staging preparation will affect the employer for years to come – employers should start well in advance of their staging date, to make well informed decisions, as their decisions and actions will have lasting impact on the business and employees.
Hefty fines or even prison could be a consequence – the pensions regulator can inspect any aspect of the pension compliance process. It can fine and even imprison directors in cases of persistent non-compliance.
Employers should implement an action plan and The Pension Regulator website, www.thepensionsregulator.gov.uk, has an excellent chart which can be tailored to the size of the business.
It sets out each step and appropriate time schedule for each of any given staging date in the form of a coloured chart for ease of determining the stages and the individual steps within each stage.
Employers should also consider nominating a contact for the Pensions Regulator. Automatic e-mails will then be sent throughout the period up to the staging date, reminding employers what they have to do next.
The Pension Regulator estimates that the cost for an employer with one to four employees of setting up the necessary systems to operate auto-enrolment is £9,100.
This is the cost to get the business into a position of being able to start deducting contributions. In addition, even if all of the employees opt out, these costs must be borne, as employees are auto enrolled and then permitted to opt out.
It's crucial to establish what information the provider will need and in what format from the very beginning.
Although many providers are flexible, some will charge substantial amounts just for the IT to report employees and contributions aligned with payroll.
Employers will need to ascertain that their payroll software is being upgraded to deal with auto-enrolment, or if it cannot be upgraded, that it can provide the date in an appropriate form for the pension provider to process.
While the staging date is determined by the number of employees on the payroll, not all employees may need to be enrolled in a pension scheme. Employers therefore need to identify the categories of staff from the employment records.
Where a business uses agency staff and the agency has the responsibility of paying them, the agency will also have the responsibility of auto enrolling them.
There is an exemption from auto-enrolment for single director companies who have no other employees but this exemption does not extend to two-director companies.
However, if the company takes on an employee, both the new employee and the director will have to be auto-enrolled.
At the staging date the employer must now automatically enrol eligible jobholders into the automatic enrolment scheme and give the eligible jobholder information telling them that they have been automatically enrolled and their right to opt out and their right to opt back in.
The employer must also give information about the eligible jobholder to the pension scheme and start paying employer contributions to the scheme.
Where an eligible jobholder has opted out of the scheme, the employer still has continuing responsibilities, one of these being to automatically re-enrol the employee every three years if they still work for them.
Within five months after the staging date, employers need to register with the Pensions Regulator.
This is an online process where the employer submits information about how they have complied with their obligations.
This information includes details of the pension scheme used and how many people you have been automatically enrolled.
Employers also need to comply with the safeguards which have been put in place to protect the rights of all the employees to have access to pension savings.
We at RSM McClure Watters are here to help guide you through the maze and if you require advice regarding pension scheme providers our colleagues in Lanyon Astor Buller are able to assist you.