Auto Enrolment for Small Businesses

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I prepared this presentation to give small business owners the best understanding of the new automatic enrolment legislation - it provides a clear and simple introduction to the legislation, what employers are required to do and what penalties they could face if they are non-compliant. I have presented this slideshow to various groups of small business owners and managers.

Transcript of Auto Enrolment for Small Businesses

  • 1. Rosie Smith | Marketing Specialist
  • 2. Auto-enrolment and your business What will automatic enrolment mean for you and your business? The basics The process what will happen to you and your business what your business will need to do The pension Who qualifies? How much will it cost? Questions
  • 3. The basic facts There are a few key things that you really need to know about: Your staging date This is the date that your AE obligations apply from Your Pensions Regulator ID code When TPR writes to you, this code will be included on each letter You can postpone This means you can put your staging date back by up to 3 months, but you must tell your employees you are doing so You must have a qualifying pension scheme available Even if none of your employees qualify for AE, they may want to opt in to your workplace pension scheme
  • 4. What will happen to your business Your staging date has already been worked out It is based on the number of employees in your largest PAYE scheme on 1 April 2012 The Pensions Regulator will write to you 12 months and 3 months ahead of your staging date These letters will include your ID code; you will need to keep this safe so you can register with TPR If you dont comply with the regulation, you could face fines There is a fixed fine of 400, as well as daily fines based on the size of the business No. Employees 1-4 5-49 50-249 250-499 500+ Prescribed daily rate fine 50 500 2,500 5,000 10,000
  • 5. What you need to do 1. Find a suitable pension scheme and register with it There are several schemes set up to take low-wage earners including NEST, NOW:Pensions and The Peoples Pension 2. Assess all your workers on your staging date 3. Automatically enrol your qualifying workers 4. Tell all your workers what youve done You can also tell your workers what youre going to do in advance, but you must let them know what their AE category is once theyve been assessed 5. Register with the Pensions Regulator You must register with TPR within four months of your staging date even if none of your employees qualify for AE 6. Accept anyone who wants to opt in to the pension scheme You will also have to be aware of workers opting out, though you shouldnt be involved in this process 7. Continue to monitor all of your employees in case their status changes 8. Reassess all workers every three years
  • 6. Who qualifies for auto enrolment? Employees will be broken down into four categories by age and earnings Age Earnings Category Under 16 16 - 75 16 75 16 22 22 State Pension Age State Pension Age - 75 Over 75 Any Below 5668 5668 - 9440 Above 9440 Above 9440 Outside legislation Entitled Worker Non-Eligible Jobholder Non-Eligible Jobholder Eligible Jobholder Above 9440 Non-Eligible Jobholder Any Outside legislation Only Eligible Jobholders must be automatically enrolled. They also have the option to opt-out of the pension scheme. You have different responsibilities to the other types of worker.
  • 7. Your obligations to your employees You have an auto enrolment obligation to all of your employees except for those outside the legislation. Each category of worker has slightly different entitlements: Autoenrolled? Outside legislation Entitled Worker Noneligible Jobholder Eligible Jobholder Can they join the scheme? Employer contribution No No None No Yes Optional No Yes Mandatory Yes Yes if theyve opted out Mandatory Because of your different obligations to the different types of worker, you must continue to monitor all workers. HOWEVER An Eligible Jobholders AE rights cannot be taken away from them if they are part of your pension!
  • 8. How much will it all cost? There are two ways to calculate pension contributions: 1. Banded Earnings Banded Earnings are based on current tax bands. A pension contribution based on banded earnings will be calculated from the earnings between the Lower Earnings Limit (currently 5,668) and the Upper Earnings Limit (currently 41,450) 2. First Pound earnings First Pound earnings are what they sound like the earnings from the first pound of the employees salary. A pension contribution based on First Pound will be calculated from the employees total earnings Some AE pension schemes (such as NEST) have an annual contribution limit, so First Pound may not be suitable. Certain things such as salary sacrifice schemes may also affect pensions contributions.
  • 9. Your contributions Pension contributions will be increasing over the next 5 years. Date Minimum % contribution Employers staging date to 30 Sep 2017 1% 01 Oct 2017 - 30 Sep 2018 01 Oct 2018 onwards 2% 3% The month to month costs Employers staging date to 30 Sep 2017 01 Oct 2017 - 30 Sep 2018 01 Oct 2018 onwards Lower salary 14,000 p/a BE FP 6.94 11.67 13.89 20.83 23.33 35.00 Average salary - 26,500 p/a BE FP 17.36 22.08 34.72 52.08 44.17 66.25 These figures are based on current National Insurance limits. They may be subject to change over the next three years.
  • 10. Questions
  • 11. Contact us Tel: 0203 137 4402 Email: [email protected] Write to: PO Box 988 Brighton BN1 3NT Visit: