UK: An employer must have an automatically enrolment pension scheme in place by their duty start date, if they have someone to automatically enrol on this date, and they need to pay contributions into it.
When do employer duties start?
Staging dates vary from employer to employer, depending on when they first employ a member of staff, and whether or not they use a PAYE scheme to pay them.
The employers who started paying their staff using a PAYE scheme between 2 April 2012 and 30 September 2017 have their staging date between 1 May 2017 and 1 February 2018. New employers from 1 October 2017 onwards do not have a pre-determined date for their duty start date. Their duty start date will begin on the contracted start date of their first member of staff. Postponement can be used in the normal way (up to three months) and a declaration of compliance must be completed within five months of their duty start date.
Extra information available to our clients on consultation:
- What is the starting date for those who does not use a PAYE scheme
- How does the postponement work
- How shall the declaration of compliance be completed
What are the criteria?
The eligible person with the following criteria will be automatically enrolled into the scheme:
- The employee earns over £192 per week (or £833 per month)
- The employee is aged 22 or over and
- The employee is under state pension age
The employees must be informed about how automatic enrolment applies to them within 6 weeks after the duty start date. They also need to monitor their staff’s circumstances in case their automatic enrolment duties change. Employees have the right to opt-out, and, where they decide to contribute to the scheme, to increase their legal minimum contribution.
Extra information available to our clients on consultation:
- When can the employee opt-out and request the refund of his contribution
- Can the employee use a personal pension scheme different from the employer automatically enrolment pension scheme
- What if the employee does not have the above criteria
How much should the employer pay?
An employer has the right to select which pension to use, needs to work out which staff must be put in, and need to pay money into the scheme every time it runs a payroll. The law requires that when it deducts contributions from its staff’s pay it must pay these to the staff pension scheme no later than the 22nd day of the following month (19th if you pay by cheque).
Pension contributions are usually expressed as a fixed sum or a percentage of earnings. The amount that is contributed to the pension scheme must be at least equal to the minimum contributions and is determined by the scheme’s rules below. If the employer contribution rate does not meet or exceed the total minimum contribution rate, employees must contribute at least the difference.
Each pensionable pay definition comes with varying contribution levels and administrative complexity, so it’s important to understand which option is right for your business.
| Basic pay Typically refers to the fixed elements of total pay excluding overtime, commission etc. Where employers already operate basic pay in payroll, this option is usually one of the simplest to administer and will be understood by most employees.
| Total pay Typically refers to all earnings under PAYE, excluding allowances for expenses (meal allowances). Where employers already operate total pay in payroll, this option is usually one of the simplest to administer and will be understood by most employees.
| Qualifying band earnings The chosen earnings amount must fall between the lower and the upper earnings limits. This is an earnings definition an employer is very unlikely to have used before their staging date and may be more complex to administer. It will also be new and more complex from an employee’s perspective.
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The increases in the legal minimum for the employers and employees pension contribution came to effect on 6th April 2018 and will change again in April 2019.
*This proposed date is subject to Parliament approval.
Extra information available to our clients on consultation:
- What is salary sacrifice and how does the ‘relief at source’ affect the contribution
- Are temporary staff, or staff whose hours and pay varies each time they are paid, subject to the scheme
- Are there limits to the amount which can be held in a pension fund and the amount that can be contributed to it each year for a member without the imposition of certain tax charges
Get in touch
If you need any assistance on the matter here above, or any support on registering the employer to the pension scheme and filing the employees’ information.
You can reach us at:
Telephone: +44 (0)20 7353 9200
Email: london@.kelmer.com