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Updates from the Clayton & Brewill team.

Pension auto-enrolment: regulator has its sights on SMEs

15th January, 2016


Clayton & Brewill is warning smaller employers that the Pension Regulator is preparing to take action against those that fail to meet the new workplace pension rules.

Around half a million UK employers with fewer than 30 employees will be required to enrol eligible staff into a pension – and start paying into it – during 2016. All employers have been given an automatic enrolment date, called a ‘staging date’, which is when they must ensure workers are signed up to the pension.

Under the new pension auto-enrolment rules employers will have to initially pay 1% towards the pension, rising to 2% in October 2017 and 3% from September 2018.

The pension auto-enrolment rules were first introduced in 2012 and affected just the very largest employers. With the legislation now encompassing smaller employers, this year we will see tens of thousands staging each month.

Between January and March nearly 100,000 employers will need to enrol employees into a pension. And this includes people hiring carers, nannies and gardens – providing they meet the eligibility criteria.

£400 fixed penalty for employers who break the pension auto-enrolment rules

The Pension Regulator has stated that it does expect to use its statutory powers more in the months to come. These powers include a £400 fixed penalty, plus a daily fine of £50 to £500 for persistent failure to meet the requirements.

You may have already had a letter from The Pension Regulator telling you about your staging date or asking you to nominate a contact – please don’t ignore these! The more time you can give to the planning process, the better able you are to mitigate both the time and cost impact on your business.

Pension auto-enrolment isn’t going away but, by acting promptly, you can make the process less painful. Here are Clayton & Brewill’s top tips on preparing your business for the new workplace pension rules:

Find out your auto-enrolment staging date

If it’s in 2016 you should have already had a letter from the regulator. If you haven’t had a letter you can find out your staging dates here – you will need to have your PAYE reference number handy.

Start talking to pension providers

With many schemes filling up quickly, businesses need to be talking to pension providers at least 12 months before their staging date.

Make a start on your workforce due diligence

Make sure you have up-to-date employee contact details, including an email address where possible, date of birth and national insurance number. And work out a method for keeping this clean, as inaccurate or missing payroll data can cause you a headache down the line.

Check that your payroll software can cope

We recommend that you plan for a ‘parallel payroll’ the first time – Dunelm paid the price for system failure with a hefty non-compliance penalty and some unwelcome publicity.

Consult early with your employees

Employees will have to contribute a minimum of 1% of their qualifying earnings, increasing to 5% over time so you need to allow them to plan ahead for the change in their take home pay. Set a strategy for internal communications with key communication milestones. And consider remote workers, those who don’t have English as a first language or who may have difficulty reading the notices.

Update your whistle-blowing policy

As mentioned earlier in this article, the Pensions Regulator is promising to be quick to impose a fine for non-compliance so make sure you are the first to know of any problems!

Ensure you know everyone that is on the payroll

Sounds simple, but think about anyone on long-term sick, on parental leave or employees on remote sites.

Bring forward the cut-off date for commission and overtime notifications

Payrolls will take longer under auto-enrolment so it may help you to allow more time for additional pay calculations.

For advice on pension auto-enrolment or any aspect of payroll services, just give Clayton & Brewill a call. We can provide ad-hoc advice or assist with the entire process – whatever works best for your business. Call us on 0115 950 3044 or click here to send us an email.

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