Legislation that came into force almost three years ago, on 30 June 2012, requires all employers in the UK to automatically enrol all eligible workers into a pension scheme. The legislation has been phased in with the largest employers having to comply first.
However, over the next two years about 770,000 small and “micro” employers will also be required to act or face heavy fines. The legislation has far reaching consequences for families who employ nannies, home helps, cleaners, gardeners or housekeepers being caught by the legislation. Reports suggest that many who employ staff in the home have been shocked to receive letters recently from the Department for Work and Pensions notifying them of their staging date and that there is a popular misconception that the legislation only applies to businesses who employ staff.
The new duties apply with effect from what is known as the employer’s “staging date” assigned to every employer by the Department for Work and Pensions. The month by month staging timetable for all UK employers started on 1 October 2012 and runs to 1 February 2018.
Essentially, if you pay an employee more than £10,000 a year, you must contribute at least 1% of their earnings into a pension – rising to 3% by 2018.
An employer must register with the Pensions Regulator within 5 months of its staging date and must do so online. The % is paid on qualifying earnings only which is the amount between £5824 and £42,385 and only for those aged between 22 and state retirement age.
It is very important that employers assess their workers to determine who is likely to be eligible and then comply with the requirements of the legislation, of which there are no less than 33 obligations.
Eligible workers must be auto enrolled into an eligible scheme which is a registered pension scheme that meets certain criteria.
It may not always been clear whether a worker is an eligible worker. However, if you employ anyone and pay them through a payroll then provided the worker meets the eligibility criteria it is likely you must comply. If you employ someone via an agency then the agency is their employer and must comply with auto-enrolment obligations.
If you pay someone less than £192 gross per week or £833 gross per month then you currently do not have to contribute to a pension for them. However, beware, if you pay them extra one month this will mean that they are over the threshold for the month and will be entitled to be enrolled into a pension for that month.
Employers with between one and four employees are liable to fines of £400 plus £50 a day for failure to comply with their auto-enrolment obligations.
For further advice on auto enrolment and how it may affect you and your workforce, please contact us. Please click on the link to be directed to the Pensions Regulator’s website http://www.thepensionsregulator.gov.uk/