Auto Enrolment: How To Ensure Smooth Integration

If your business has 30 to 50 employees, you’ll have to join larger firms by auto-enrolling employees into a workplace pension next year. If you are already covered by auto-enrolment, you are still affected by some changes that come into effect from April 2014.

Once a firm is covered by auto-enrol, it must enrol all employees who are aged between 22 and their relevant State Pension Age and earn a certain amount — £10,000 from April 2014. The only exceptions are employees who actively opt out in writing.

When a business is covered by auto-enrol depends on the number of employees it has who meet the criteria:

  • Those with 250 or more have been covered for a few years.
  • Those with 50 to 249 employees became covered from 1 April 2014.
  • Those with 30 to 49 will become covered from 1 August 2015.
  • Those with less than 30 will become covered from 1 January 2016. (A handful will become covered from 30 June 2015 as part of a test; you should already know if this affects you.)
  • Smaller firms, or those which only started employing staff after April 2012, will become covered later on, with the final deadline being 2018.
  • Once you are covered, you have a six-week deadline from the date you become covered to enrol all relevant employees. There’s also a six-week deadline to enrol individual employees when they first meet the criteria, for example a new employee joining, or an existing employee getting a pay rise that takes them over the £10,000 threshold.

These deadlines were previously four weeks. They’ve been extended from 1 April 2014 to take account of cases where payroll runs monthly. Some companies found it wasn’t until they ran payroll that they knew an employee had become eligible, by which time the four week period had almost run out.

Business owners and HR departments have three major logistical tasks. The first is to keep track of how many employees are eligible for auto-enrol, and thus whether your business is covered. This number could change regularly, so you’ll need to configure your payroll system to keep continuous track — speak to your system provider if necessary to see if there are any relevant updates to your software or if you need to manually configure it.

Secondly, once you are covered, you need to make sure your system collects the relevant money and puts it into the pension scheme (which you should have already selected.)

Thirdly, you need to make sure your finance department and management have made allowance for the extra expense for the business that comes from the mandatory employer contribution to the pension. As a rough rule of thumb, it must be at least one per cent of the earnings that are eligible for National Insurance, which will rise to two per cent in October 2017 and three per cent in October 2018.