You might remember the adverts from a few years ago, in which a variety of employees and employers shouted “We’re all in”, but do you remember what they were about?
The answer is the workplace pension scheme, and if you have 30 or more employees then you may already be “in”.
Under a law introduced in 2012, all employers must offer a workplace pension scheme and automatically enrol eligible workers – those who are between 22 and state pension age, earn more than £10,000 a year and who work in the UK. This requirement has applied to larger employers since October 2012 and will apply to all employers by 2018.
If you are not already “in”, there are a number of things you need to know. Firstly, if you haven’t done already, you should find out when your automatic enrolment duties come into effect, known as the staging date.
If you pay your staff through a pay as you earn (PAYE) scheme, you can find out using this calculator from The Pensions Regulator. If you don’t pay through PAYE, your staging date will be 1 April 2017.
It is worth noting that even if your employees are not eligible and you don’t have to enrol them by law, they can still join the scheme if they want to and you can’t refuse.
When you enroll your employees you must notify them in writing, including the date you added them, the type of pension and who runs it, how much you will contribute and how much they will have to pay as well as how they can leave the scheme.
Can employees opt out?
This ‘opt-out’ comes with a number of caveats and responsibilities. You can’t encourage or force employees to opt out, nor can you imply a candidate is more likely to get a job if they do.
You must let employees opt out if they ask and refund money they have paid if they opt out within one month.
If they’ve opted out you must let them re-join the scheme at least once a year, and enrol them back in once every three years if they are still eligible for automatic enrolment.
You also can’t close a workplace pension scheme without automatically enrolling all members into another one. However, there are a number of things you can do.
Can you delay enrolment?
You can delay the enrolment date by up to three months, and potentially longer if you’ve chosen a ‘defined benefit’ or ‘hybrid’ pension scheme. You must notify employees of the delay in writing and allow them to join in the meantime if they ask.
You may offer a ‘salary sacrifice’ (or SMART) scheme as an alternative, in which your employees agree to give up part of their salary and you pay it straight into their pension. This can mean both parties pay less tax and National Insurance.
All this might sound complicated and burdensome, but it is better to deal with it sooner rather than later and risk facing heavy fines.