Workplace pensions

Are you an employer?…..Do you have a workplace pension?…….Do you need to provide one?

Are you an employer?

If you have a PAYE scheme and deduct tax and National insurance from an employee’s wage you are an employer. If you pay someone to work for you but don’t have a paye scheme you need to check if they are an employee and if you need one – Check employment status for tax – GOV.UK (www.gov.uk)

Do you need to provide a workplace pension?

Employers have to provide a workplace pension scheme for eligible staff as soon as your first member of staff starts working for you, this date is known as your duties start date.

Who are eligible staff?

Eligible staff are all staff who:

• are aged between 22 and the State Pension age
• earn at least £10,000 a year

If staff become eligible at a later date due to a change in their age or earnings, you must put them into your pension scheme from this date.

Employers who offer a pension scheme that provides contributions above the mandatory level are not required to set up an auto-enrolment scheme, unless they have eligible employees who are not members of the other scheme.

How do you set up a workplace pension?

The pensions regulator tool can guide you through the process step by step to ensure you are fully compliant – Employers | The Pensions Regulator

Once you have chosen a provider you can set up an account with them simply online.

How much do employers have to contribute?

Employers must pay at least 3% of your employeeʼs qualifying earnings into the pension scheme.

Under most pension schemes (check the provider you choose), qualified earnings are total earnings between £6,240 and £50,270 a year, (£520 and £4,189 a month). Total earnings are made up of:

• Salary or wages
• Bonuses and commission
• Overtime
• SSP
• SMP, SPP, SAP

How much do employees contribute?

Employers must pay at least 5% of their qualifying earnings into the pension scheme.

If an employer decides to pay more than 3%, the employees % can be reduced accordingly. Total contributions must amount to at least 8%.

Are employee contributions deducted before or after tax?

How the employee contributions are taken is something you will decide when you look at setting up a pension scheme. Different schemes use different methods and it is important to choose a scheme that best suits you and your employees.

Managing contributions.

You must deduct contributions from eligible staff each month. You will need to submit a schedule and pay these to your pension scheme provider by 22^nd of the following month.

Re-enrolment and re-declaration.

On the 3^rd anniversary of your duties start date you must re-enrol staff into the pension scheme if:

• They left the scheme more than 12 months before the anniversary date
• Are in the scheme but pay below the minimum contribution levels

You must write to eligible staff within 6 weeks of the re-enrolment date to tell them you have put them back into the pension scheme.

You must complete a re-declaration of compliance every time you carry out your re-enrolment duties, even if staff were not re-enrolled.

Requests to opt-in or out of the pension scheme.

All staff can opt-in to the pension scheme. You must check they are eligible and put them into the scheme within 1 month of getting their request.

Staff can opt-out of the pension scheme whenever they want. You must take them out of the scheme within one month of getting their request.

If staff ask to opt-out of the pension scheme within 1 month of joining, you will have to refund their contributions within 1 month. If they ask to leave after 1 month, their contributions will be kept in their pension until they retire.

Do you need to keep records?

You must keep records of how youʼve met your legal duties for maintaining your pension scheme, including:

• The names and addresses of staff enrolled
• When contributions are paid in
• All requests to join or leave your pension scheme
• Your pension scheme reference or registry number (PSR)

You must keep these records for 6 years except for requests to leave your pension scheme which must be kept for 4 years. You must also keep track of the ages and earnings of staff so you can enrol them when they become eligible.

Is there anything ad-hoc to be aware of?

Maternity leave

When a member of staff is on Maternity leave the employer will keep contributing to the work pension. Employers pay in the same amount as before you went on maternity leave. Employees also keep contributing but your payments will be based on their maternity pay, not their usual pay.

Temporary staff

If you employ staff whose hours vary, pay goes up or down, are seasonal workers, or are on a temporary or short-term contract, then the legal duties will still apply to you. What duties you will have towards them will depend on their ages and earnings.

Delaying a workplace pension

You can choose to delay working out who to put into a pension scheme for up to three months for some or all of your staff. This is known as postponement. You must write to your staff to tell them what you are doing and how automatic enrolment applies to them.

You might choose to use postponement if you have temporary staff or to get past the staff’s probation period.

If any of your staff write to you asking to join a pension scheme during the postponement period, you must put them into one once you have received their request.

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