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How do I sign up my employees to a workplace pension?

All employers have to enrol eligible employees into a pension scheme by April 2017.

This might sound like a daunting task, and you might be unsure as to what process to follow. We aim to help by explaining how you can sign up your employees to a workplace pension scheme, and how we can help with the process.

How do I sign up my employees to a workplace pension?

Who qualifies?

The process for signing up employees is often called auto enrolment. This became a law in October 2012 and requires employers to make a pension provision, which is available to employees that meet the appropriate requirements. These are: 

  • Working in the UK
  • Earning a minimum of £10,000 per year
  • Being between 22 and the state-pension age

Employees falling within these requirements should be enrolled into a pension scheme. However, the deadline for enrolment varies depending on the size of a business.

Businesses have specific deadlines. These are referred to as staging dates.

Staging dates

The deadline for each business to have set up auto enrolment varies depending on the number of employees and PAYE reference.

This deadline can be worked out via the Pension Regulator’s website. It requires you to use HR records to state how many employees you had on 1 April 2012 and also your business’s PAYE reference.

It is your duty as an employer to ensure you have your staff enrolled by the staging date.

Please note that employers who don’t utilise a PAYE system have a staging date of April 1 2017. 

What do I need to do?

Once you have your staging date it’s important to put all your pension provisions in place before that date.

This involves making several decisions and covers a number of areas, including:

  • Amending pay systems to accommodate changes. Employers have a minimum contribution they need to make to a pension. Ensuring your systems are able to handle these payments, and that you’re able to process pension contributions correctly, is crucial to making sure that you remain compliant with pension regulation. 
  • Decide on salary sacrifice. This is a process where an employee ‘gives up’ a portion of their salary, which is then directly paid into their pension. This means that an employee and you, the employer, will both pay less tax and national insurance. However, the employee needs to be consulted before agreeing to this process.
  • Provide staff details. This means providing the details of all employees being enrolled in the pension scheme.
  • Keep staff informed throughout the process. This process needs to be transparent. The start date for pension contributions or any delays to this date, changes to pension schemes, or withdrawal from a pension scheme has to be communicated to staff. This is best done in writing to provide both you, as the employer, and the employee a record of all communications.
  • Complete your declaration of compliance with The Pensions Regulator. Once your staff are enrolled and your contributions have begun, you need to inform the Pensions Regulator. This means you’re then registered as having fulfilled the duties set to you as an employer and helps you to avoid any undue penalties.

Failure to comply

Due to auto enrolment being a legal requirement, the penalty for failing to meet your staging date can be severe.

The Pensions Regulator can issue a range of penalties to a business. The first is a fixed penalty notice, which comes with a £400 fine.

From there, penalties can move to more severe fines depending on the number of staff you employ. An escalating penalty is charged per day, costing anywhere from £50 to up to £10,000.

The regulator also has access to a similar penalty, called a Prohibited Recruitment Conduct Penalty Notice. Again, this can increase depending on a business, based on the number of employees it has, ranging from £1000 to £5000.

If a business is found not paying the right contribution to staff, an alternative penalty that can be issued is a civil penalty. Targeted at businesses and business owners, this can involve individual fines of £5000 to fines of up to £50,000, which are aimed at the company.

How FSB can help

Auto enrolment can feel like a minefield, with lots of areas to navigate, deadlines to meet and decisions to make. To help, FSB members have exclusive access to our Workplace Pensions service. This is a specially designed service that provides businesses with a fully compliant pension scheme that’s quick and simple to set up.

The service features:

  • Access to leading pension provider, Legal & General
  • One off set-up charge that covers all aspects of setting up your pension scheme, with guidance and assistance, starting at £399 +VAT
  • Allows you to set up your scheme for your staging date, but not start contributions until then
  • Full support and guidance with a dedicated freephone helpline
  • Access to online information, education and admin tools for you and your employees
  • Ability to transfer pensions if an employee leaves your company

To find out more about auto enrolment or how FSB can help you with your pension scheme, get in touch with a member of our team or visit our FSB Workplace Pensions page.

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