Auto Enrolment and what it means for you as an employer

Auto Enrolment and what it means for you as an employer

Automatic enrolment into workplace pensions has been rolling out across the UK since 2012. It was introduced to ensure that the majority of employees begin to make proper provision for having a work based pension. There are estimated to be 1.8 million small and micro employers in the UK who already began to enrol in the scheme on 1st June 2015. It is expected that all employers will be signed up to use the scheme by early 2018.

Once a workplace scheme is in place, both the employer and employee need to make contributions to a pension scheme. There is a minimum employer contribution that will eventually reach 3% however employers can make higher contributions if they so decide. Employees must also make contributions which are part funded by tax relief. By 6 April 2019, contributions in total will be a minimum 8%: 3% from the employer, 4% from the employee and an additional 1% in tax relief. There are also options for employees to opt out of the scheme.

In some cases, directors may be exempt, depending on whether they have an employment contract and who else is working for the organisation.

A director will only be classed as a ‘worker’ if:

  • They have a contract of employment with the organisation
  • At least one other person (who can be another director) also has a contract of employment with the organisation.

Only organisations that employ workers have duties under automatic enrolment. Organisations with no staff or no qualifying staff that have been told they must start using automatic enrolment are required to complete a declaration of compliance to let the pension’s regulator know that they are not an employer.

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