Starting in 2012, all employers have been required to enrol their employees in a pensions scheme. This applies to all employees who earn over £10k per year and who are not already enrolled in a workplace pension scheme. These rules apply to both full-time and part-time employees.
- Employers will need to assess each staff member against eligibility criteria to determine whether they need to be enrolled in a pension scheme.
- If they do not meet the requirements they do not need to be enrolled but may request to be included.
- Staff do not have to remain in a workplace pension scheme and may opt-out, but they must be enrolled in the scheme initially.
Employees that choose not to remain in the pension scheme can opt-out for one month from the day their membership began and will receive a refund of any contributions paid. Participation may be ceased after the one-month opt-out period and contributions may or may not be refunded depending on pension rules.
There are a number of responsibilities that employers will need to fulfil before adding employees to a workplace pension scheme. Along with assessing eligibility requirements and their start date employers will need to select a pension scheme and write to each member of staff, notifying them of their enrollment.
Employers will also need to ensure that the correct contribution and employee deductions are made. Contribution rates must equal or exceed the minimum amount set by law and rates are agreed upon when the scheme is set up.
- The minimum pension contribution is 8% of employee earnings with a least 3% paid by the employer.
Contribution calculations are reviewed each year by the government but for 2012/22 the eligible earnings range is £6240 to £50,270.
Types of pay to include in the calculation are:
- salary
- wages
- commission
- bonuses
- overtime
- statutory sick pay
- statutory maternity pay
- ordinary or additional statutory paternity pay
- statutory adoption pay
For employers using PAYE for their payroll certain tasks will be completed each month. For those that use accounting software, some of the processes may be able to be automated, including auto-enrolment contributions.
- Record employee pay including salary, overtime, bonuses, and any other pay.
- Calculate employee tax and National Insurance contributions
- Calculate employer National Insurance contributions
- Print pay statements for each employee
- Report payments and contributions to HMRC
Tax months run from the 5th of the month to the 6th of the following month and any late submissions to the HMRC can result in a late filing notice and a possible penalty.
Pension contribution payment dates are agreed with the scheme provider, but when pension contributions are deducted from employee pay they must be paid to the pension scheme no later than the 22nd of the following month. Any breach of this agreement may trigger a fine from The Pension Regulator.
Aftax provides special tax consultancy services to clients throughout the UK. For companies of all structures whether a partnership, limited company or a corporation we give proactive tax advice to support business needs.
Using the latest technology to make tax digital, we supply actionable advice for new business start-ups and seasoned organizations, designed to give companies a full understanding of their tax position and demonstrate how best we can assist. With extensive experience in PAYE, corporation tax, and National Insurance legislation we can help your business to manage its commitments and take advantage of tax planning opportunities.
If you have questions about setting up or contributing to a pension scheme using PAYE and auto-enrolment schedule a free consultation and see how we can help you navigate the regulatory requirements to maintain compliance and avoid expensive fines.