Managing Auto Enrolment Pensions for Employers
If you’re an employer, then you’re probably already well aware that you need to be enrolling your staff in a workplace pension scheme. No matter what the size of your business, whether you have 1 employee or 100, you still need to have a pension scheme in place and have your staff enrolled – unless they have specifically stated they do not want to be. While the dates to get this in place were rolled out gradually, this rule has been in place since October 2012. Which is why it amazes us that some businesses still don’t have a system in place, or a way to manage the auto-enrolment process for their employees. If that sounds familiar, then read on for a few tips.
Do Some Research On Pension Schemes
The first thing you need to do is some research. Auto-enrolment itself is pretty straightforward, but there is no set pension scheme you have to enrol in. That choice is completely up to you – and there are a lot of options out there! So find out about as many as you can, and make a list of what works well about them, and what doesn’t. You should also talk to your financial adviser, as they will be able to point you in the direction of specific schemes that will work well for your individual situation and needs. It’s important not to rush this stage, as you want to make sure you’re choosing the right scheme for your business and your employees.
Talk to Your Money People
We say ‘money people’ because depending on the type of business you run and your size, there are a number of suppliers who can help you out. If you use an external company for payroll, they need to know the details of your auto-enrolment scheme so that they can deduct the right amount from payslips and make the right payments each month. If you use an accountant, they will also need to know so that they can factor it in when preparing your accounts or giving you advice. And if you use a financial adviser, they can help you decide which pension scheme is right for you and give you some pointers on how to set it up and manage it.
Work Out Your Contributions
With auto-enrolment, both employer and employee are required to make regular contributions. But the amount you contribute, and expect your employees to contribute, is a bit more flexible. The total amount the employer and employee must contribute is dependent on the individual scheme’s rules, but there are still some minimum contributions that have to be made for auto-enrolment. These minimum contributions have been slowly increasing, and in April of this year, the rules reached their ideal level – with no indication that they will go higher. Now, the employer must contribute a minimum of 3% of the employee’s earnings, while the employee has to contribute 5%. But it’s worth remembering that this is a baseline – and you as an employer can contribute more than this, if you wish. This could be used to create a more attractive employment package and can be advertised as a benefit for workers. So work out what you want to contribute, and let the relevant people know.
Include Pension Info in Your Onboarding
Once you have chosen and set up your pension scheme, you need to do the auto-enrolment part. The law states that all employees should receive information about and be enrolled in the company pension within two months of starting work at your business, unless they expressly tell you (in writing) that they do not wish to be enrolled. Some businesses choose to tell employees about their pension after some time has passed – usually around 1 month – so that they can be sure the new employee will stay before they deal with all the paperwork. While there is some sense to that (especially if it is a high-turnover position), we are firm believers in sooner rather than later. A great way to communicate all the information about your pension scheme is to include it in your onboarding pack for new employees. This means you have met your legal obligations, and your employees have time to think it over and come to a decision that is right for them, without feeling rushed. It also means the paperwork can be processed along with all the other onboarding documents, so it’s much less likely to be forgotten about once everything is settled.
If you’re not sure how to go about managing the auto-enrolment process or want some advice on which pension scheme would be right for you, it’s always worth talking to a professional. At Chilvester Financial, we are happy to help all business owners understand their obligations under auto-enrolment, and help you find the right pension scheme for your business. To find out more, please get in touch with us today.