What is auto-enrolment?
The government has introduced legislation with the aim of helping people to save more for their retirement through an automatic enrolment scheme their work place will provide. It requires all UK employers to auto-enrol eligible workers into an employer pension scheme to which they must also contribute. Failure to comply with this new legislation will incur fines and penalties for the company. The workplace pensions came into force back in 2012 for larger corporations and from 2015 onwards for smaller businesses.
Who does it apply to?
Your workforce will fall into one of three categories;
- Eligible job holders
- None-eligible job holders
- Entitled workers
It is important to pre-access your employees and understand the category into which they fit. The main criteria for eligibility are;
- They are aged between 22 and State Pension age
- They earn more than £10,000 a year
- They work in the UK
What is next?
You must inform the Pensions Regulator who will be responsible for managing your auto-enrolment process by nominating a contact, this is usually your accountancy firm. The nominated contact will then receive all updates, correspondence and the crucial information from the regulator to process this correctly.
Why is This so Important?
If you fail to comply with statutory notices, you may be issued with a fixed penalty notice. These types of penalties are set at £400.
Another option for The Pensions Regulator is to issue an escalating penalty. These types of penalties will vary depending on the number of staff you employ i.e. if you employ a high number of staff then the penalty will be much higher. These penalties range from £50 to £10,000 per day.
An alternative penalty at the disposal of The Pensions Regulator is the civil penalty. This penalty may be utilised if you fail to pay the contributions that you owe your staff when they contribute to their pension scheme. This penalty can be up to £5,000 for individuals, i.e. business owners or managers. There can also be fines of up to £50,000 for the company itself.
The final option that The Pensions Regulator can call upon is the ‘Prohibited Recruitment Conduct Penalty Notice’. The severity of this penalty varies depending on how many staff are employed in the company and can range from £1,000 to £5,000.
For further information or to find out how we can help your business please call 01384 271 858 or get in touch via our contact form