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Live wire Pensions planning Many electrical contractors will find themselves having to enrol staff in a workplace pension scheme this year. Now is the time to prepare for this, says Paul Budgen
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n 2012, the government introduced new laws requiring employers to enrol workers in a workplace pension. These have been introduced in stages, with largest employers affected first. Now it’s time for smaller employers to do the same. So if you have received a letter from the Pensions Regulator about auto-enrolment, you may be one of the 45,000 employers who will need to auto-enrol workers this year. Here is a list of some of the key things you might need to consider:
Know your staging date This is the date you need to have all your eligible workers enrolled on a workplace pension scheme. Staging dates are dependent on the size of your PAYE payroll. Head over to the Pensions Regulator’s website to find out when your staging date is (www.thepensionsregulator.gov.uk).
Find out who it affects Identifying who is eligible is important because you may find that not all your workers need to be enrolled. An eligible worker is: • Aged between 22 and the state pension age • Working in the UK • Earning above £10,000 Other types of workers can ask to be enrolled and you may need to make contributions for them too. You can find out more information about this from the Pensions Regulator or from our website (www.nestpensions.org.uk).
Talk to staff
Illustration: Cameron Law
In small and micro-employers, it’s common to communicate with workers face-to-face and in team meetings. When it comes to telling your workers about auto-enrolment, it’s your responsibility as an employer to do this in writing, either by email or on paper. There’s a lot you will need to shed light on so we’ve made things easy by creating ready-to-use templates that are available for free on our website. Telling your workers should help them understand how the changes will affect them, so they’re not left in the dark and won’t keep coming to you with questions.
Understand the cost With auto-enrolment, workers, employers and the government all contribute into a pension pot. The minimum contributions start at two per cent of qualifying earnings and will increase to eight per cent over the next few years. As an employer, the minimum amount you will have to pay in starts at one per cent, increasing to three per cent.
Examine payroll practices Pensions and payroll go hand-in hand. It’s where you find out who needs to be automatically enrolled, how much their contributions should be and then where you process these. With that in mind, looking at your payroll processes may help ease the way for auto enrolment. According to our NEST Insight 2015 report, 64 per cent of employers pay their workers monthly and 34 per cent pay weekly. Auto-enrolment requires employers to check the eligibility of their workers every pay period and make adjustments to their contributions accordingly. An employer who pays their workers at different frequencies and at different intervals may have to do this several times a month. So you may decide that aligning pay periods streamlines the process for you.
Get any help you need If you feel you’d rather focus on the day-to-day running of your business, or need to understand more about what auto-enrolment means for your business, help is available. Our research found that nearly three-quarters of small and micro-employers will be turning to an intermediary for help from an accountant, a payroll provider or an independent financial adviser, for example. They will be able to help you to understand your duties better, find a suitable pension scheme or outsource your auto-enrolment administration. Alternatively, you can appoint a third party to set up and run your scheme for you. Whatever you decide, now is the time to think about it to ensure you are prepared ahead of your staging date. Paul Budgen is head of business development at the government workplace pensions scheme NEST
Connections Summer 2015
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