The Payroll Dept Auto Enrolment


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The Payroll Department provide outsourced payroll services to companies of all sizes. Staffed by experienced professional specialists. We are BACS approved, giving you the peace of mind whilst saving your business time and money.

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The Payroll Dept Auto Enrolment

  1. 1. A u t o E n r o l m e n t & T h e P a y r o l l D e p a r t m e n t
  2. 2. •Work Place Pensions •Auto Enrolment •The Pensions Regulator •Pension Providers •The Payroll Departments Role •Planning for Success Please use these slides to help understand the following concepts:
  3. 3. C o n t e n t s o f We b i n a r 1. What is Auto Enrolment 2. Auto Enrolment so far 3. Contributions 4. Key Terms 5. Q & A’s 6. The Pensions Regulator 7. Pension Providers 8. Postponement 9. Our Role 10. AE Road Map 11. Q&A’s
  4. 4. W h a t i s A u t o E n r o l m e n t • ‘Workplace Pension Reform’ is the term used to describe the changes to pensions in the UK, where employees are automatically enrolled into an ‘Automatic Enrolment’ pension scheme, as long as they ‘qualify’. • A workplace pension, which is arranged by the employer, is a way for employees to save for retirement. Some workplace pensions are also called ‘occupational’, ‘works’, ‘company’ or ‘work- based’ pensions. • If a company already has a pension scheme they will need to check that it ‘qualifies’ if their plan is to use that scheme as their ‘Workplace Pension’. • Companies who do not currently have a pension scheme setup will need to set up an ‘Auto Enrolment’ scheme. The pension scheme must ‘qualify’ - meaning the employee and employer contributions match or exceed the minimum contributions (detailed later in this document) and also that no restrictions are placed on membership. • Every company will be required to offer employees the chance to join a pension scheme, which both the ‘employee’ and ‘employer’ will contribute in to. The employer has to contribute at least the minimum contribution into the scheme in order for the scheme to qualify. • In most cases the government also add money into the pension scheme in the form of tax relief.
  5. 5. A b o u t A u t o E n r o l m e n t • Employees need to be automatically enrolled if they:  Are aged between 22 and State Pension Age  Earn more than £9440 a year (2013/14 limit)  Work in the UK • If a company does not have a qualifying pension scheme then it must introduce one. If the employer doesn’t currently make a contribution to the pension, they will have to by law when they ‘automatically enrol’ entitled workers. • Your clients are responsible for ensuring they have a compliant pension scheme in place and that the correct employees and employers contributions are paid into the scheme. • What’s the reason for auto enrolment? The average life span has increased and people are living a lot longer. These changes to pensions are because the current state pension will just not be sufficient when retiring and therefore trying to encourage people to save for retirement. Summary 1901 – 10 Workers for every 1 Pensioner 2010 – 3 Workers for every 1 Pensioner 2050 – 2 Workers for every 1 Pensioner
  6. 6. J o b h o l d e r s d e f i n i t i o n
  7. 7. Eligible jobholder The employer must • automatically enrol and make contributions • if using postponement, provide a notification to the eligible jobholder • process any opt-out notice • automatically re-enrol approximately every three years • keep records of the automatic enrolment process Non-eligible jobholder The employer must • arrange pension scheme membership if the non-eligible jobholder decides to opt-in, and also make contributions • provide information about the right to opt-in, unless using postponement • if using postponement, the employer must provide a notification to the non-eligible jobholder • process any opt-out notice • keep records of the enrolment process Entitled worker The employer must: • arrange pension scheme membership if the entitled worker decides to join • provide information about the right to join, unless using postponement • if using postponement, provide a notification to the entitled worker • keep records of the joining process J o b h o l d e r s c o n t i n u e d
  8. 8. A u t o E n r o l m e n t s o fa r One Year in into the Pension Reform • More than 750,000 members • Over 2,350 employers • Opt outs around 8 per cent Feedback that we are hearing • Be prepared • Demand for standardised payroll-centric solutions
  9. 9. S t a g i n g Vo l u m e s b y Q u a r t e r This forecast sets out our expectations of when medium, small and micro employers are likely to become subject to the new automatic enrolment duties (their staging date).
  10. 10. C o n t r i b u t i o n s • Contributions are the amount both the employee and employer will contribute to the employee pension pot. For many companies this may involve an increased cost for each employee enrolled into the pension. • Below is the proposed contribution period: **These percentages and dates could be subject to change. ++ If the employee pays income tax, the government will add money to the pension in the form of tax relief. The tax relief will be shown differently depending on the pension type being used – either a ‘Net Pay Agreement’ (NPA) or a ‘Relief at Source’ (RAS). If running an ‘NPA’ pension, the employee will see a 1% deduction on their payslip. Running a ‘RAS’ pension, the employee will see the 0.8% on the payslip and the 0.2% tax relief is added by the government. • Note that these contributions are based on the bare minimum employer contributions, so that as long as the ‘Minimum Contributions’ are met, the contributions being taken are enough. For example, the minimum employer contribution up to October 2017 is 1% and the minimum total contributions are 2%, this means the employer can choose to contribute the whole 2% and the employee to contribute 0%.
  11. 11. Ke y Te r m s • ‘Auto Enrolment’ This is the term used to describe the changes to pensions, where employers will automatically enrol eligible jobholders into a pension scheme. • ‘Workplace Pensions’ This is where employees can be automatically enrolled into a pension scheme. This is the pension scheme setup for your retirement that’s arranged by the employer. Both the employee and employer can contribute, though the employer must contribute for it to qualify as an auto enrolment pension scheme. • ‘Staging Date’ This would be the date by which companies should start enrolling those eligible into a qualifying pension scheme. • ‘Postponement’ Postponement is the postponement of employees assessment which can be up to 3 months after a companies staging date. Postponement reduces the risk of difficult pro-rated calculations and problems relating to refunding of contributions due to people opting out in a different tax year to the one in which deductions were made.
  12. 12. Ke y Te r m s • ‘Qualifying Earnings’ These are earnings used to identify if an employee is an eligible or non-eligible jobholder or an entitled worker. Qualifying earnings include: basic pay, wages, salary, bonuses, overtime, commission and any maternity/paternity/adoption/sick pay. • ‘Contributions’ These are what both the employee and employer will contribute into the employees’ pension pot. • ‘Opt Out’ Employees who have been automatically enrolled can choose to opt out if they wish. Employees have a 6 week window after being auto-enrolled as member of Auto Enrolment Pension Scheme during which they can opt-out. If they do so in this time then any employees and employers contributions deducted are refunded by the Pension Provider. • ‘Opt In’ Certain employees, who don’t earn enough to be automatically enrolled, but do have qualifying earnings greater than the lower limit, can choose to opt in to the pension unless they are already an active member of a qualifying pension scheme.
  13. 13. Ke y Te r m s As shown in the ‘Contributions’ slide earlier, with auto enrolment pensions, if the employee pays income tax, the government will add money to the pension in the form of tax relief. The tax relief will be shown differently depending on the pension type being used – either a ‘Net Pay Agreement’ or a ‘Relief at Source’. • ‘Net Pay Agreement’ Using a Net Pay Agreement pension the employee’s contribution reduces the taxable gross pay and hence the employee receives the tax relief at the payroll end by paying less tax. • ‘Relief at Source’ Using a Relief at Source pension, an amount of tax relief is added by the government at the pension providers end. • ‘The Pensions Regulator’ They are the UK regulator of work-based pensions. They are responsible for auditing companies ensuring that employers are compliant with auto enrolment. • ‘NEST’ The National Employment Savings Trust is a pension provider available to all employers who want to use them. They offer a pension scheme designed for automatic enrolment that any UK employer can use to meet their new workplace pension duties, no matter what the size of the organisation. However they are not the only choice.
  14. 14. Questions and Answers
  15. 15. T h e Pe n s i o n s R e g u l a t o r The Pensions Regulator is overseeing the implementation of auto enrolment. They are available for help and guidance if required. You can visit their website: Every business MUST register with The Pensions Regulator to confirm their company is complying with auto enrolment. The deadline for registering is 5 months after the company staging date. The following information will need to provide a number of details when registering with The Pensions Regulator: Employer details: Name, Address, Email and all PAYE reference numbers Details of the pension scheme(s) being used: Scheme name, Employer Pension Scheme Reference (EPSR), Pension Scheme Registry Number (if there is one) Number of Employees: The number of workers employed on the staging date (or on the last day of any postponement periods). Number of Employees enrolled into the Pension: Number of eligible jobholders automatically enrolled into the pension scheme
  16. 16. T h e Pe n s i o n s R e g u l a t o r Late Compliance You may receive penalties/fines for late registration. • Penalty notices will be issued to punish persistent and deliberate non-compliance. • A fixed penalty notice will be issued if you don’t comply with statutory notices, or if there’s sufficient evidence of a breach of the law. This is fixed at £400 and payable within a specific period. The Pensions Regulator can also issue an escalating penalty notice for failure to comply with a statutory notice. This penalty has a prescribed daily rate of £50 to £10,000 depending on the number of staff the company employs.
  17. 17. P e n s i o n P r o v i d e r s Your choice of automatic enrolment pension scheme could have an impact on the payroll processing time and costs involved. However your should take independent advice in order that the scheme that is a best fit for your business. If you have an existing scheme, you should ascertain from the pension provider whether it meets automatic enrolment requirements and is therefore classed as a qualifying scheme. However please note – you may not be able to use this existing scheme for all employees and an additional scheme may need to be set up to cover all additional automatic enrolment requirements. A l r e a d y h a v e a P e n s i o n S c h e m e i n p l a c e
  18. 18. H o w C a n T h e P a y r o l l D e p t H e l p ? The Payroll Dept offers: Workforce Assessment Understand your workforce and when they will be eligible for Auto Enrolment prior to staging Assessment and Automatic Enrolment of eligible employees Continual Assessment of your workforce Configure postponement Allow postponement on staging dates Allow postponement on start of employment Allow postponement when an employee becomes eligible Day to Day Auto Enrolment Management Allow employee opt in/opt outs Termination of automatic enrolment pensions
  19. 19. H o w C a n T h e P a y r o l l D e p t H e l p Employee Communications We create the correct, personalised communications for each of your employees Automatically prepare communications to all of your employees Pension Provider Communications Automatically manage Pensions data and payments Pension file templates for new members and contributions, we also have a configurable pension provider communications tool that will allow us to create data files Auto Enrolment Audit Allows us to view history of Auto Enrolment activity by employee
  20. 20. P o s t p o n e m e n t • Taking advantage of postponement can simplify the auto enrolment process to ensure compliance. • Below is an example of the how postponement works at Staging. • Benefits of Postponement • A company can align their pay reference period with their pay period. Therefore contributions due are based on a whole pay period rather than a part pay period • Postponement provides breathing space for them to implement the AE scheme.
  21. 21. FA Q ’s a r o u n d p o s t p o n e m e n t Q – Toby is a new employee. His probation is 3 months. Can postponement be used for the new employees? A – Yes postponement can be used in this situation as long as it is communicated to the employee. Q – I take on seasonal workers. Can I use postponement? A – Yes postponement can be used in this situation as long as it is communicated. Q – I have already used postponement for Toby. But I have extended his probation period. Can I postpone him for a further 3 months? A – Toby must be reassessed on the last day of postponement, and if he meets the criteria of an eligible jobholder he must be automatically enrolled.
  22. 22. The Payroll Departments Role
  23. 23. O u r R o l e • We cannot supply financial advice about pensions. But as a potential first point of contact, we are in a position to you guide you in what we know and the challenges faced with automatic enrolment. • We provide a pre Auto Enrolment report with the tax implications of pensions and how automatic enrolment might impact your business performance. This report includes – Your duties as the employer – Your workforce assessed – whose eligible/non eligible or entitled – Getting ready for AE – What you need to do – What will happen if you don’t comply/penalties etc – Cost Analysis Report – Step by step guide for the next 12 months • We will be calling all clients 18 -12 & 6 months prior to their staging date to ensure they are managing Auto Enrolment and help wherever we can. • Once you have a good quality pension scheme, you will need to ensure your employees contribution payments are on time, and give due attention to data protection and anti-money laundering provisions. These responsibilities form a vital part of the effective running of the pension scheme. • We will send communications, newsletters, TIPS plus update our social media on a daily basis to provide sources of information, guidance and advice to help you along the way.
  24. 24. K n o w i n g t h e S e r v i c e Who will do the employee assessment? The Payroll Dept Pension Provider or middleware This will require payroll run plus submission of payroll data to 3rd Party plus amendment on return of employee assessment information • Maybe one- off staging for a static workforce • May be onerous for volatile workforce • May be impossible for weekly payroll Who will create and distribute the employees letters? The Payroll Dept • Email • Postage costs Pension Provider or other agent • Please bear in mind the following: Who will communicate with the Pension Provider The Payroll Dept You
  25. 25. A R o a d m a p f o r A E • We suggest a minimum of 12 months prior to your staging date/s • Be aware of your choices and how they can affect the services we are able to provide • Use the flow diagram below to understand your current Auto Enrolment status
  26. 26. Questions and Answers
  27. 27. Please feel free to contact us regarding any questions you may have on or 0117 9353900 Stay up to date with the latest news on Auto Enrolment
  28. 28. You will be emailed a copy of the these slides & thank you for listening