Auto-enrolment and how it affects me and my business?
The changes on workplace pensions and automatic enrolment in recent years will soon also impact on small and micro businesses.
An important consideration you need to make, as an employer, is how you can liaise with your employees, however big or small the workforce, in order to engineer a smooth a transition as possible for auto-enrolment.
Any change in working matters on this scale can be confusing for your workforce, so providing clarity and support through effective communication are essential to be sure both your business and your employees are best prepared for the new pensions regime.
Getting to grips with workplace pensions and auto-enrolment
As a business owner you’ll know that auto-enrolment has been in place since 2012, with larger businesses having to comply at various intervals since then. Recent changes in pension laws mean that all businesses, including those with at least one employee, will now have to legally enrol all eligible employees onto a workplace pension scheme by a given staging date.
While larger businesses have already come to terms with the basic requirements of auto-enrolment and workplace pensions, smaller businesses are understandably still learning the ropes.
The first step in getting to grips with auto-enrolment is understanding who is and isn’t eligible for the scheme, and knowing the costs of contributions.
Basically, those who are eligible and have to be automatically enrolled are:
- Employees aged between 22 and state pension age (the earliest age they can claim their state pension),
- Those who earn more than £10,000 a year and
- Those who work in the UK.
In terms of business-owner contributions, the Government has set a requirement depending on the business. For most this is a 1% contribution of the employee’s qualifying salary (earnings over £5,824).
For employees that don’t fit into these requirements, they can ask to be enrolled on to the scheme, but remember you’ll still have to make the minimum employer contributions, unless they earn under £5,824. Once you’ve established the contribution payment amounts, you can start planning the introduction of your chosen scheme into the company.
The right workplace pension scheme
Choosing the right pension scheme for the company and your employees is an important decision you’ll need to make and, with the introduction of the Pension Freedom Reform, it’s important to help and support your employees, should they choose to take out a different pension scheme from the one you decide to offer.
Remember, every three years you’ll need to re-enrol employees that aren’t in the company’s workplace pension.
It’s worth noting that regular pension reviews are advisable, to keep the channels open between you and your employees, and to better understand any concerns or difficulties that develop over time.
A straight forward way of providing continuous support with this may be an online resource on your company or staff intranet pages, highlighting any updates and outlining in basic terms what your employees should consider with their pension plans.
Whether you, as an employer, need reassurance that you’ve selected the most suitable scheme for your type of company and that it complies with the legislation changes, or if you require help with changing your existing pension scheme, calling on professional advice is the best starting point all round.
Getting this advice right from the start will also help avoid unnecessary and stressful repercussions further down the line.
Seeking advice is beneficial for both employer and employee, and gaining a better understanding of the subject can lead to better communication between you. By seeking external advice, your employees will be able to consider their best options and how to make the most of their pension. As an employer, this means providing support for the employee’s decision making, resulting in better employee engagement and even a possible reduction in business risk.
It goes without saying that the team here at Seer Green are on hand to help you through all stages of auto-enrolment, so please feel free to give us a call on 01633 816 522 for an initial chat.
More on the auto-enrolment pension scheme
You can read more on the Pension Freedom Reform on the Government website here