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What do I need to do at my duties start date?

At your duties start date, you’ll need to have a qualifying scheme in place if there’s someone to auto-enrol on this date. Your duties start date is when the legal duties obliging you to enrol some or all of your workers into a qualifying pension scheme begin.

At your duties start date you’ll need to contact all of your employees and tell them what’s happening. It’s a legal requirement to tell them within 6 weeks from your duties start date:

– how auto-enrolment affects them;
– their rights; and
– whether you’re delaying working out who to put into a pension scheme.

This communication from the employer to employees is called the ‘notice’.

You only need an auto-enrolment pension scheme in place by your duties start date if there’s someone to auto-enrol on this date. If there’s no one who needs to be auto-enrolled, then there’s no need to have a pension scheme in place. However, it may be useful to decide which pension scheme would be used if the person or people you employ actually need to be enrolled (or ask to join).

Even if there are no employees to be auto-enrolled, you’ll still have a duty to write to your employees and complete your declaration of compliance.

What aren’t I allowed to do and what happens I don’t comply?

The auto-enrolment obligations are set out in legislation and The Pensions Regulator is responsible for ensuring compliance with the rules. So to make sure you’re not breaking the law, it’s a good idea to make yourself aware of the main things you mustn’t do.

You mustn’t:
– Encourage employees to opt out or give up active membership of the pension scheme – this is known as ‘inducement’
– Coerce employees to opt out of the pension scheme
– Discriminate against employees seeking to join a pension scheme
– Take or fail to take any action that leads to an eligible employee ceasing to be an active member of a qualifying scheme, or that results in the pension scheme, of which they are a member, ceasing to be a qualifying scheme
– Operate prohibited recruitment where a job applicant’s success of getting the job depends on whether or not they opt out.

If you don’t comply, The Pensions Regulator will initially focus on education rather than imposing fines for non-compliance. If you don’t meet your duties, they’ll initially just tell you to put things right. Any further failure may lead to the government fining you a lot of money. In the event of persistent and deliberate non-compliance, The Pensions Regulator can issue escalating penalty notices of up to £10,000 a day. And, ultimately, you could face criminal prosecution and even imprisonment.

Which employees do and don’t I need to enrol?

Your auto-enrolment obligations relate to your employees and this means:

“Any individual who works under a contract of employment (an employee), or has a contract to perform work or services personally and is not undertaking the work as part of their own business.”

This is a very broad description and you’ll need to make sure you don’t miss anyone.

Many of your employees may need to be automatically enrolled, depending on:

  • their age
  • their earnings
  • whether they normally work in the UK

And other employees can ask to join too.

If your staff have a one-off increase in wages, because they work irregular hours or earn flexible incomes, they should be enrolled the first time* they earn over the auto-enrolment threshold of £192 a week or £833 a month if paid monthly.

Once staff have been enrolled, you must pay regular contributions into their pension scheme (unless they’ve decided to opt out). If the staff member’s earnings fall below £120 a week or £520 a month, you may stop paying contributions unless the rules of the pension scheme they’ve enrolled into requires them to continue.

* Note that under the postponement rules, you can delay enrolling staff into the pension scheme when they first meet the criteria to be an eligible jobholder for up to 3 months.

If you have freelance workers on the business’s payroll with contracts, paying tax and National Insurance contributions, they’ll need to be auto-enrolled. If this isn’t the case, they don’t need to be auto-enrolled.

Not all employees have to be put into a pension scheme automatically, but they can still ask to join. Whether they’re enrolled automatically or not depends on how much they earn, their age and if they normally work in the UK.

If your employees don’t want to be enrolled, they still must be enrolled if they’re assessed as eligible. They do have the option to leave the scheme at any time. If they opt out within 30 days, they’ll be entitled to a refund.

Among the employees you must put into a workplace pension, there are some exceptions. You can choose whether or not to enrol them if:

  • they’ve handed in their notice (unless they take it back later)
  • they benefit from some kinds of tax protection that applies to the pension scheme
  • in the last 12 months they’ve received what’s known as a ‘winding-up lump sum’ from a different pension scheme you’ve offered.

You may need to check with your employees whether any of this applies to them.

If your employee is leaving employment, you may apply postponement to the employee meaning they don’t need to be auto-enrolled up to 3 months taking them after their leave date. You’re allowed under legislation to enrol them if you wish to do so, however, for an employee who’s leaving you’ll need to decide whether it’s worth doing so.

Can an employee reduce their pension contributions?

Pension savings can be a very effective way to save for the future. Your employee may not be aware of how much money they’re missing out on if they stop paying into their pension pot. They should visit our website before they make a decision, to understand what they risk losing by stopping or reducing their contributions.

What if your employee wants to stay in the pension scheme, but doesn’t want to pay the balance to meet the legal minimum contribution?

An employee can decide that they’d like to reduce their pension contributions so as they’re not meeting the legal minimum contributions. This means the employee will no longer be classed as ‘eligible’ for auto-enrolment’.

It should be their choice to pay below the minimum levels, and their employer is legally not allowed to suggest, encourage or induce them to do so.

Employers can choose to support the employee’s decision to reduce their pension contributions by following our guide,’Paying below the minimum contribution levels’.

Reducing their pension contributions means:

  • the employee should remain in the pension scheme as an active member.
  • you don’t have to continue paying pension contributions for them – but you can if you want to and can choose how much you’ll pay.
  •  you may need to re-enrol your employee into the pension scheme every 3 years (sometimes sooner). They’ll then have the opportunity again to see if they’d like to contribute to meet the total legal minimum contributions.
  •  the employee can decide to join the pension scheme and pay towards the total minimum contributions at any point in the future. They’ll just need to let their employer know in writing. This can be a signed letter or email, if it includes a statement to say it has come from them.

If you choose not to enable your employees to pay below the legal minimum contributions, they can opt out and pay pension contributions directly into their pension pot by Direct Debit. They’ll still benefit from the tax relief on their payments, and you won’t need to contribute. Your employee should be directed to our website if they’d like to set this up.

I can’t pay for contributions, what happens now?

By law, when you take contributions from your employees’ wages, you must pay these to your pension provider by the 22nd of the following month.

What should I do if I’m unable to pay for contributions?

Things are very difficult for many businesses right now, and we understand that you may be experiencing problems paying for your employees’ pension contributions.

The Pensions Regulator (TPR) has said that auto-enrolment duties continue to apply as normal, including your re-enrolment and re-declaration duties. However, they’re taking a measured approach to this.

Even if you’re unable to pay for contributions, you should continue to send us your employee data every pay period. This means that we’ll be able to allocate contributions to your employees quicker once you are able to make payment.

We’ll still send automatic reminders to you when your contributions are late. We’re on hand to support you with any difficulties you may be facing, so please get in touch as soon as you can if this applies to you.

What could happen if I don’t pay?

When contributions are 90 days late, we’re obliged to report the case to TPR, and write to all affected members. You may be fined by TPR if you don’t pay outstanding contributions by this date.

When you’re able to pay

Simply log into your Online Services account and select ‘Make a payment’ from your account home page.

We’ll apply your payment first to the amount that has been outstanding the longest. This is to help you avoid falling into further arrears.

If you pay by automated collection

Please note, if you send us contributions data or ask us to take payment within 6 working days of your collection date, we won’t be able to request this from your bank in time. We’ll collect this payment on the next collection date. Our system sends automated emails, so you may receive reminders while we’re processing your contributions.

What support is available?

If you’re in financial difficulty due to the coronavirus outbreak, the government has made support available to employers.

Visit the government website for information on coronavirus support available.

The Pensions Regulator is also frequently updating their guidance to employers – check their website for the latest information and guidance.

Which employees can ask to join?

Whether they’re enrolled automatically or not depends on how much they earn, their age and whether they normally work in the UK.

If they’re enrolled automatically, they’re known as ‘Eligible jobholders’.

Then there are 2 categories for the employees who can ask to join:

Non-eligible jobholders – you’ll have to pay into their pension pots if they ask to join.
Entitled workers  – you won’t have to pay into their pension pots if they ask to join.

If your employee isn’t eligible but has asked to join, please add them to payroll with an auto-enrolment status of ‘non-eligible’ when you send us your employee data. If you need help you can contact us.

Does your scheme allow postponement?

Yes, the maximum legal period that you can delay putting employees into your pension scheme is 3 months if you have a monthly payroll and 12 weeks if you have a weekly payroll. If you plan to do this, your duties start date stays the same but your first pay reference period (PRP) start date will change according to when we’ll expect that first contribution. Postponement is an option under the Simply Tailor sign-up route.

What are the auto-enrolment duties for enrolling directors?

According to The Pensions Regulator, an employer has the option to enrol a director into a workplace pension if they’re eligible for auto-enrolment. But they don’t have to.

The regulator’s definition of a director

A director refers to anyone who holds office as a director. Under the Companies Act 2006, a person is viewed as a director if:

  • they’ve been formally appointed
  • they’re in a decision-making role which relates to the governance of a company as a director (who may not necessarily be formally appointed)
  • If a person just has ‘director’ in their job title, this wouldn’t count.

A director would be viewed as eligible for auto-enrolment if:

  • they have an employment contract with the company (this can be a written, verbal or implied contract)
  • there’s at least one other person who has an employment contract with the company

If an employer chooses to not enrol a director, they’ll still need to communicate to them and complete their declaration of compliance.

A director still has the right to opt in or join a workplace pension. If they make this request, the employer must enrol them (unless they’re in their notice period). If a director is enrolled, the employer’s auto-enrolment duties apply.

For more information about enrolling directors into a workplace pension, visit The Pensions Regulator’s website.