The Sage Network Simplifies:
The first blog in our 'simplify' series talks about Automatic Enrolment and the simple steps to making it easier for your practice.
14 September 2016
Q. What do my clients and I really need to know about automatic enrolment?
A. Since October 2012 every employer has had a legal requirement to automatically enrol their employees into a workplace pension and make contributions to it. The initial focus was on larger businesses, but by 2018 all employers will have to comply.
Employers are set a deadline for putting a pension in place by, known as a staging date. The Pensions Regulator, which regulates work-based pension schemes, will write to an employer at least 12 months before the deadline to let them know their individual date. The current staging dates are for those firms with fewer than 30 employees. This will be followed by micro-employers with one to four staff members.
Q. What’s the scale of the automatic enrolment challenge?
A. By the end of March 2016, 110,103 employers had been through the process. In the next two years the number of employers who have to comply jumps to a massive 950,000.
Q. How should I communicate these changes to my own staff and clients?
A. Within six weeks of the date of automatic enrolment, an employer must provide written information, with basic details such as contributions payable, to staff who need to be automatically enrolled. Employers must also tell staff about their right to opt out and opt back in again at a later date.
The employer may instruct a third party, such as an accountant, to provide the information to workers but it’s still the employer’s responsibility to check that the information provided is correct and deadlines are met. Ongoing communications, such as opting-in new employees, must also be managed.
Q. How can I help my clients?
A. Your client will need to decide whether to use business advisers, such as accountants, for running the payroll and determining which pension scheme to choose, for example. An employer can nominate an additional contact who will receive information from the Pensions Regulator, including regular emails letting them know what their client needs to do to meet their automatic enrolment duties.
An accountant can advise their client about their staging date, identify which workers are eligible for automatic enrolment, ensure systems are compliant, and explain the tax implications of the changes.
Accountants can also offer a payroll bureau service ensuring all eligible employees are set up, their contributions are paid and new eligible employees are added on. The payroll software used must be well equipped to handle the changes and keep all records up to date. It must offer employees the option to opt out of the scheme and ensure that every eligible employee has been informed of their rights.
Q. I’d like to help my clients. What pricing structure should I put in place?
A. According to the Regulator, small employers can expect to pay an average of £440 for automatic enrolment advice and support to set up the scheme. For those firms whose payroll is already run by an accountant, bookkeeper or payroll agency, they can expect to pay an average of £200 to set up the extra work for automatic enrolment. To manage the payroll, accountants would charge either an annual or monthly administration fee. The cost will vary depending on which tasks you carry out but the Regulator states that monthly payroll software charges are up to £12 per month.
Q. What happens if I don’t enrol my clients on their staging date?
A. If an employer fails to comply with their duties, the Regulator may take enforcement action. A £400 fixed penalty notice will be issued if an employer does not comply with statutory notices. The Regulator can also issue a civil penalty of up to £50,000 for cases where an employer fails to pay any contributions due. By the end of June more than 3,000 employers had been handed a fixed penalty notice. Legal responsibility for automatic enrolment lies with the employer.
Q. Where can I learn more?
A. The Pensions Regulator website will give you lots of advice about automatic enrolment, your responsibilities as an employer, business adviser and the all-important staging date.
Action plan for accountants acting as advisors
- Check your client’s eligibility for automatic enrolment and their staging date.
- Check which of your client’s employees need to be enrolled into a pension scheme.
- Let staff know how automatic enrolment applies to them, once they have been assessed.
- Calculate your client’s costs and your pricing structure (including automatic enrolment set-up, the ongoing expense of paying money into a pension scheme, and managing processes such as payroll).
- Emphasise to your clients the importance of meeting their duties to avoid hefty fines.