What is auto enrolment?
If you employ at least one person, you may have to enrol them into a workplace pension, under the Pensions Act 2008. This is known as 'automatic enrolment'.
The date you have to start enrolling your employees will depend on the size of your business. This is known as the 'staging date'.
Do you have to offer a pension?
If you employ workers you have to set-up a workplace pension for them, however there are some exceptions. These will depend on whether you:
Run your own business
Employ people in your home (e.g. cleaners, personal care assistant etc)
If you run your own business
You are required by law to enrol your workers into a workplace pension scheme, but not every employee will be eligible.
If you employ people in your home
If you pay people to work for you at your home, you have to enrol them into a workplace pension if they meet the qualifying criteria. These can include cleaners, gardeners, nannies or personal care assistants.
If you pay an agency, rather than paying the worker directly they will be responsible for enrolling them into a pension.
What if you do not have any employees?
You do not need to follow the new employer's duties if:
You are a sole director with no other staff
Your business only has director's, none of which have an employment contract
Your business only has directors and only one of them has an employment contract
Your business has either; ceased trading, gone into liquidation or been dissolved
How much will it cost?
The amount you pay will be a percentage of your employees' qualifying earnings.
To work out your employees' qualifying earnings, you need to deduct the qualifying threshold for pensions (this is £5,824 a year in the 2016/17 tax year) from their yearly salary.
Example: a salary of £25,000 would have £5,824 deducted, leaving £19,176. This means the qualifying earnings is £19,176 and you will base your contributions on this figure.
Your contribution will be deducted from your employee's gross earnings, so your national insurance bill should be reduced as a result.
There is also a tax relief from the government. This will help bump up your employees' total pension contribution each year.
This table shows the level of contribution required up to April 2019:
|Who pays||Until March 2017||From April 2018||From April 2019|
|Government tax relief||0.2%||0.6%||1%|
The following table shows you how much you will need to contribute if each of your employees earned £25,000 a year (figures based on qualifying earnings of £19,176 per year)
|Number of employees||Total contribution (Until March 2018)||Total contribution (From April 2018)||Total contribution (From April 2019)|
Make sure you budget to cover the cost of your contributions, or you could lead yourself into debt.
When do you have to start?
This depends on the number of employees you have and how many are paid through a single PAYE scheme:
|Number of employees in your largest PAYE scheme||Staging date between|
|250 or more||Oct 2012 and Feb 2014|
|50 - 249||1st April 2014 and 1st April 2015|
|Less than 50||1st June 2015 and 1st April 2017|
If you want to align your staging date with other key dates in the financial calendar, like when you file your tax return or at the start of the tax year, contact The Pension Regulator.
If you bring your staging date forward, you will have to start working towards your employer duties earlier.
What if you have recently set-up your business?
Your staging date will be determined by the first date you pay an employee through a PAYE scheme, as shown in this table:
|First employee paid through PAYE scheme||Staging date|
|1 April 2012 - 31 March 2013||1 May 2017|
|1 April 2013 - 31 March 2014||1 July 2017|
|1 April 2014 - 31 March 2015||1 August 2017|
|1 April 2015 - 31 December 2015||1 October 2017|
|1 January 2016 - 30 September 2016||1 November 2017|
|1 October 2016 - 30 June 2017||1 January 2018|
|1 July 2017 - 30 September 2017||1 February 2018|
If you only employ workers through personal service contracts, and do not pay them through a PAYE scheme, your staging date will be 1st April 2017.
Go to The Pension Regulator website and enter:
1 - Your PAYE reference (it can be found on your P6, P9 coding notice or P30BC white payslip booklet).
2 - Your 'letter code' which is a 10 digit code found on your auto enrolment letter (if you do not have this, use this link to find out your letter code).
You will then be given your staging date online.
What type of pension do you need to offer?
There is a wide range of workplace pension schemes available, but not all of them will accept auto enrolment for employees.
If you have an existing workplace pension scheme; check if it will accept new members through auto enrolment.
If it does not, you will have to find a new workplace pension scheme for any employees not paying into an existing scheme.
Read our guide for more information on preparing your workplace pension.
If you want expert help setting up your workplace pension just complete our auto enrolment form and we will put you in touch with a qualified broker.