Seven-step auto enrolment checklist for employers
Small Business Guides
6 min read
Retirement saving is an important issue. People are living longer and need more money in retirement. Many workers don’t have enough – or even any – retirement savings. Auto enrolment was introduced to change this. Find out more about what you need to do as an employer.
What is auto enrolment?
When the UK government found too few workers were putting money into a pension, they introduced a new law – called automatic enrolment or ‘auto enrolment’ – to help fix the problem.
This means every employer must automatically enrol workers into a workplace pension scheme if they are aged between 22 and the state pension age, earn more than £10,000 a year and work in the UK. This automatic enrolment is automatic from the employee perspective only – as an employer there are things which you need to do.
Follow the seven-step checklist below to ensure you understand your auto enrolment obligations and what to do about them.
Know your staging date and when to act
Your staging date is the deadline by which you’ll need to have a scheme in place and be ready to enrol your employees. In general, employers with more employees will have an earlier staging date than those with fewer employees.
Your staging date is based on how many employees were on your payroll on 1 April 2012.
- Any employer with a PAYE scheme registered before 1st April 2012 must have enrolled their staff by April 2017.
- Any employer with a PAYE scheme registered from 1st April 2012 must have enrolled their staff by February 2018.
The Pensions Regulator will write to you at least 12 months before you’re affected, but it’s a good idea to know your staging date as early as possible. You can also check your staging date online.
Assess your workforce
If you have at least one employee, then auto enrolment applies to you. Even if you just employ someone to work for you like a cleaner or nanny, you are legally an employer.
As an employer, you must auto enrol your qualifying employees into a qualifying pension scheme. And you must not encourage or force your employees to opt out. But your employees can decide to opt out on their own.
Workers who need to be automatically enrolled into a qualifying pension scheme are called ‘eligible jobholders’. An eligible jobholder is:
- aged between 22 and state pension age (you can check the state pension age online)
- working or ordinarily working in the UK
- earning above £10,000 (this amount is reviewed by The Pensions Regulator each year).
When you have figured out which of your employees is an eligible jobholder, you must:
- automatically enrol eligible jobholders into a qualifying pension scheme, and
- make employer contributions on their behalf into that pension scheme.
Workers who are not eligible jobholders still have the right to opt-in to a pension scheme or the right to join one. And depending on how much they earn, you may need to pay contributions for them.
Review your pension arrangements (or select a scheme if you don’t have one)
If you have an existing pension scheme for your employees, you can consider enrolling all eligible jobholders into this scheme. But you’ll need to check with the pension scheme provider that your scheme qualifies for auto enrolment.
If you don’t have an existing pension scheme or you can’t use your existing one(s) for auto enrolment, you’ll need to choose another one. In this case, you’ll have to automatically enrol all eligible jobholders in your new pension scheme.
So what is a ‘qualifying scheme’? A qualifying scheme is one where:
- minimum contributions or above are made into the scheme, or
- the scheme provides a minimum rate at which benefits will build up.
If you need to select a qualifying pension scheme, there are plenty to choose from including the National Employment Savings Trust (NEST). NEST is the workplace pension set up by the government. It has a public service obligation to accept all qualifying employers that wish to join.
Communicate the changes to all your workers
You are required to write to each of your employees after your staging date to tell them:
- their auto enrolment rights
- how automatic enrolment applies to them
- what you’ve done for them
- why you’ve done it
- the details of the pension scheme you’ve chosen for them
- what contributions will be deducted from their pay
- that they have a right to opt out of your pension scheme if they wish to.
The Pensions Regulator has free templates you can download to do this.
Automatically enrol your eligible employees
As an employer, auto enrolment is one of your basic duties. You need to remember some key points:
- Automatic enrolment is not optional.
- As an employer, you must have a qualifying pension scheme in place.
- You must automatically enrol ‘eligible workers’ into that scheme and make contributions on their behalf.
- Your employees can choose to opt out (but they must be enrolled in a qualifying scheme in the first place).
- You have to register with The Pensions Regulator (TPR).
All this may sound quite complicated and a lot of work, so the sooner you start the process, the better. Contact someone from The Pensions Regulator if you need help, as it’s the UK government’s official body for workplace pensions and automatic enrolment.
Complete your declaration of compliance for The Pensions Regulator and keep records
You need to provide certain information to the regulator about how you’ve complied with your auto enrolment duties. This includes things like how many people you’ve enrolled and into which pension scheme(s).
You’ll need to complete a declaration of compliance even if you don’t have anyone to automatically enrol. The declaration is required by law and you could get fined if you don’t do it in time. Your declaration deadline is five calendar months after your staging date.
Your declaration provides a snapshot of your workforce on your staging date and you’ll need to include each employee. You can complete your declaration by answering questions and providing details online. It’s a good idea to start filling in your details as soon as you can.
Contribute to your workers’ pensions
Initially, the auto enrolment contributions to your qualifying scheme are as follows:
- you (the employer) contributes 1 percent of your employee’s salary
- your employee contributes 1 percent of their salary
- added together, this total equals 2 percent of your employee’s salary
- the government may add any tax relief to the pension
By late 2018, the contributions increase to:
- you (the employer) contributes 3 percent of your employee’s salary
- your employee contributes 5 percent of their salary
- added together, this total equals 8 percent of your employee’s salary
- the government may also add any tax relief to the pension
Work out the minimum contribution for each person you'll need to auto enrol using The Pensions Regulator online tool.
Do the right thing – understand your responsibilities and take action
It is vital that you understand your automatic enrolment responsibilities. You are legally required to do so and The Pensions Regulator can fine businesses that don’t follow the law.
Follow the steps above to make your life easier and help look after your employees. And make sure your accounting software makes it simple and stress-free for you to meet your auto enrolment responsibilities.