A Guide for SMEs

You may have heard about Auto Enrolment Pensions and be uncertain how it will affect you as an employer. Auto enrolment is the commonly used term for the Government’s workplace pension reforms for employers announced in October 2012.  The legislation is being introduced in stages between 2012 and 2018.  By September 2016, all employers will be required to auto enroll their employees into a qualifying scheme.

An eligible employee is anyone aged between 22 and state pension age whose earnings are over £10,000 a year.  Minimum contributions will be based on income above the national insurance earnings threshold – currently £5,824 and up to £42,385.  This range is called ‘qualifying earnings’.

How we can help

The exact date for Auto Enrolment is determined by the PAYE reference of the business and from that staging date onwards, employers must meet their new duties under the legislation.

Once the staging date is known (or even if it has passed) the advisory team at McCreas can help with the planning to meet the obligations.  There is not just the monetary pension contribution to consider, but also the cost of administration.  Employers are required to review their workforce, analyse what pension arrangements are in place and what additional arrangements will be required to fulfil auto enrolment responsibilities.

It will be necessary to sort employees into three categories – Eligible Jobholders, Non Eligible Jobholders and Entitled Workers – at the staging date and at each payroll run thereafter.

Once the workforce categories have been assessed, this allows the employer to budget for pension contributions. However, the cost of implementing the system and setting up the controls required to ensure the legislation is complied with should also be considered.

In summary; the reforms require employers to undertake to pay pension contributions and run a workplace pension scheme in accordance with the legislation. This can be complex and it is vital that expert advice is taken.