Here is a summary of the actions employers need to take to prepare effectively for auto-enrolment:
- Find out your staging date, ie the date by which you are required to have implemented the automatic enrolment of your eligible employees, and develop a plan 12-18 months in advance.
- Assess your workforce – eligible, non-eligible and entitled employees.
- Communicate the changes to all of your workers.
- Automatically enrol eligible employees in a qualifying pension scheme.
- Register with The Pensions Regulator and keep records, especially of opt-outs and non-joiners.
- Contribute to your employees’ pensions.
What happens if I do nothing?
The employer duties are not optional. The Pensions Regulator (TPR) will be responsible for ensuring that you comply with your employer duties. Although TPR’s approach will be to educate and encourage compliance, you’ll face substantial fines or even imprisonment if you don’t comply.
How will auto-enrolment affect my business?
For most UK employers, even those currently offering staff pensions, this legislation is likely to result in disruption and higher costs:
- Staff-related expenditure typically represents around 85% of the average UK employer’s costs. Any increase in staff costs could affect profits.
- In our experience, even generous pension schemes (defined as employer contributions of 6% or more) do not achieve full take-up from all eligible employees. Under automatic enrolment all eligible employees will be enrolled, which means that costs will increase proportionally.
- The current eligibility criteria for company schemes usually exclude large sections of the workforce or require employees to wait at least three months before joining. This is not the case with auto-enrolment.
- The definition of eligible earnings for auto-enrolment is wider than that currently used by most employers, bringing more employees within the scope of the scheme.