Recruiting your first employee? Don’t forget the auto enrolment changes
Auto enrolment for workplace pensions came into force in the UK back in 2012, with implementation on a staged basis since then, starting with larger companies.
Its aim is to encourage more people – working in all types and sizes of business – to make financial provision for their retirement. Under auto enrolment rules, employers have to automatically put certain employees into a pension fund, which the employee and employer then both contribute to.
As average life expectancy continues to increase, and with people generally enjoying a longer retirement, the State Pension will be insufficient to meet most people’s financial requirements and so additional provision is necessary. Studies of saving habits within the UK had shown that this knowledge alone was still not prompting adequate financial planning – hence the introduction of the legislation to “force” the issue.
Although employees are not legally obliged to remain in a pension scheme that their employer has enrolled them into, data since 2012 is showing that the number of “opt-outs” is far lower than might have been expected – perhaps because the employee contribution levels have been affordable, and because employees also benefit from their employer making contributions on their behalf.
Recent data from the Pensions Regulator shows that over 8 million employees have now been auto-enrolled into pension schemes by almost 650,000 employers.
What is changing?
Initially, each business was allocated a staging date – the date by which they had to comply with the legislation – with the smaller businesses having the later staging dates.
However, a change this year means that if a business becomes an employer for the first time on or after 1st October 2017, it will need to start complying with auto enrolment duties straight away.
Instead of having a future staging date, their “duty start date” will instead be the day on which the first worker begins to be employed.
Heavy fines can be imposed on businesses which fail to meet their auto enrolment obligations.
These obligations include setting up a workplace pension scheme, assessing workers for eligibility, providing the required communications to staff, making employer pension contributions and collecting employee contributions through the payroll.
New employers will still be able to utilise the 3 month postponement period, providing that postponement letters are sent to the workers within 6 weeks of their start date.
Complying with auto-enrolment duties should now be part of your normal process when recruiting a new member of staff – just like issuing the employment contract and setting up the payroll.
This might sound daunting for the smaller business, but help is on hand. HJS Outsource can help you with all your auto enrolment duties, as well as handling your payroll, VAT returns and bookkeeping. For more information please contact us or call on 0808 1644 222.