Don’t become complacent with auto-enrolment

For thousands of businesses across Britain, the new auto-enrolment regulations will no longer be looming on the distant horizon but already up and running.

With the staggered “staging dates” from the Pensions Regulator having been rolling forward since 2014, it’s likely that the majority of Britain’s SMEs are already auto-enrolling their staff. But that doesn’t mean there aren’t still complexities for employers when it comes to making sure they continue to comply with the rules.

Clearly, this will include the employment of new members of staff – whether casually or full-time – for whom auto-enrolment decisions still need to be made. And with last year’s announcement that the Government spend on enforcing the rules was nearly doubling, from £21.3m to £40.4m, it’s clear the regulators mean business.

So what should employers continue to be looking out for?

  1. Check the thresholds: Each year the government will review the earnings thresholds for automatic enrolment so employers need to check these figures on www.thepensionsregulator.gov.uk. This year the earnings trigger for auto-enrolment has stayed the same as it was last tax year (2014/5) at £10,000. But the upper level has increased slightly to £42,325 from £41,865 last year.
  2. Don’t forget new members of staff: When taking on new members of staff, remain rigorous about checking eligibility. It’s very important to know what kind of contracts employees have – for example, whether they are self-employed or employed by you. The Pensions Regulator offers only guidance on this, drawing a difference between contracts for or of services. For small companies without large HR departments, it may well be worthwhile to take professional advice on how to identify different types of workers as you continue to take them on.
  3. Continue to communicate: As with when companies signed up to auto-enrolment, it’s still imperative to maintain the same levels of communication about the rules with all new staff members as it was when signing up to the new system in the first place. For all new employees, you need to communicate clearly what the auto-enrolment rules are and let them know that they are automatically enrolled if they meet the correct age and earnings criteria, but can opt out if they wish. Also, as with before, if employees don’t meet the criteria – if they’re under 22, don’t work in the UK or earn under £10,000 – they still get the option of signing up to auto-enrolment but it may mean that you as their employer don’t have to make contributions to their pension pot.
  4. Don’t forget about your existing staff: If any employees opted out of auto-enrolment when it was first put in place, remember that as their employer it is your duty to re-enrol them every three years – which still gives them the choice to opt out again if they want. Remember that the law places the burden or responsibility firmly on the employer: they cannot be penalised for forgetting the rules, but you certainly can!

 


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Lee Maddock

Chartered Financial Planner Lee Maddock trained as an accountant and having spent a majority of his career working at organisations like Scottish Equitable, is now Director at Millbank Financial Solutions which specialises in financial planning for SMEs, as well as personal finance issues including longevity, retirement planning and family protection investment.

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Chartered Financial Planner Lee Maddock trained as an accountant and having spent a majority of his career working at organisations like Scottish Equitable, is now Director at Millbank Financial Solutions which specialises in financial planning for SMEs, as well as personal finance issues including longevity, retirement planning and family protection investment.