automatic enrolment for small and micro employers

Roderick Ramage, BSc(Econ), solicitor

first posted on my website on 17 November 2014

 

DISCLAIMER

This is not advice to any person and may not be taken as a definitive statement of the law in general or in any particular case. I do not accept any responsibility for anything that any person does or does not do as a result of reading it.

 

automatic enrolment for small and micro employers

 

The government wants to make a workplace pensions available to everyone and has introduced automatic enrolment (AE).  The Pensions Act 2008 requires all employers to enrol employees and other workers automatically into a pension scheme.

There is no exception for small employers, but there is for the low paid. 

The smallest employment band in the AE regulations is from one to thirty employees.  The earliest staging date for this band is 1 June 2015 and the latest is 1 April 2017.  The last date for new employers (ie new since 1 April 2012) is 1 February 2018, after which AE will apply to all employers.

The most likely situations are:

1            the employer has no pension arrangements for its employees; and

2            the employer or some of its employees have pension arrangements which were not established for AE.

Each employer needs to know:

1            whether or not AE applies at all;

2            its “staging date”, which is the date on which AE applies to it;

3            which if any of any people who work for it are “job holders” and must be enrolled;

4            whether any other persons have AE rights;

5            how much it must pay in contributions;

6            what to do; and

7            what information must be given, to whom and when.

 

advice – a problem for small employers

Large employers usually have HR and payroll department and extensive external advice, but, because of cost, very small employers will have to manage with no specialist in-house department and possibly with a very limited budget for professional advice.  The Pension Regulator has a very through and detailed AE website for those who can spend the time working through it.  Numerous large consultancy firms offer a comprehensive range of advice and AE related services, but they, or some of them may be too expensive for small employers.

In many cases all that an employer needs should be available through the main AE pension scheme providers.  All the same, some employers might want additional guidance about the process or help if they are going to undertake AE on a DIY basis.  For them I have prepared a guidance pack.

 

guidance pack

I offer a guidance pack which is suitable for small employers to use on a DIY basis or with the assistance of their present accountancy, financial or legal advisers. It consists of the following,

A          introduction

0      list of documents (click here for a copy)

1          a guidance note and checklist  including a series of questions leading to answers to the employer’s need to know points 1 to 7 above (click here for a copy)

2          a “why and when” explanation of AE (click here for a copy)

B          the following documents of which other version should be available on the Pension Regulator’s and AE scheme provider’s websites -

3          specimen letter to employees not liable to be enrolled (click here for a copy)

4          specimen letter to employees who are to be enrolled (click here for a copy)

5          notice to person who is to be enrolled (click here for a copy)

6          notice to person without qualifying pay (click here for a copy)

7          notice to person in qualifying scheme (click here for a copy)

8          notice to person with right to opt in (click here for a copy)

9          notice if enrolment date to be deferred (click here for a copy)

C         contract documents -

10      specimen pension clauses for employment contracts (click here for a copy)

11      specimen salary sacrifice (or salary exchange) contract (click here for a copy)

 

Note:       I am not authorised to give financial advice and none is included in the pack.

        The pack is for guidance only and is not advice.  I accept no responsibility for anything that anything anyone does or does not do as a result of reading or using the pack, unless I have accepted instructions to advise.

 

A version of this pack and more AE and employment related  pension documents with explanatory footnotes (not included in the above) are available in Kelly’s Legal Precedents 21st edition with the 2015 supplement: see the link below.

http://www.lexisnexis.co.uk/store/uk/Kellys-Legal-Precedents-21st-Edition-and-CD/product

 

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