What is workplace pension auto-enrolment?

Auto enrolment is a legal requirement for employers in the UK.

Under auto enrolment rules, employers must:

• Assess their staff

• Enrol eligible employees into a workplace pension scheme

• Make contributions to that pension

• Deduct employee contributions through payroll

These duties apply even if you only employ one person.

The rules are overseen by The Pensions Regulator.

More information from The Pensions Regulator is available here:
https://www.thepensionsregulator.gov.uk/en/employers

Who must be enrolled?

Not every worker is automatically enrolled. You must assess staff based on their:

• Age

• Earnings

• Where they work

An employee must be automatically enrolled if they:

• Are aged between 22 and State Pension age

• Earn at least £10,000 per year

• Work in the UK

These employees are known as eligible jobholders.

What about other staff?

There are two other categories of worker:

Non eligible jobholders
These are employees who:

• Are aged 16 to 74

• Earn between £6,240 and £10,000 per year, or

• Are outside the 22 to State Pension age range but earn over £10,000

They are not automatically enrolled, but they have the right to opt in and receive employer contributions.

Entitled workers
These are employees who earn below £6,240 per year.

They have the right to join a pension scheme, but the employer is not required to contribute.

Earnings thresholds can change, so they should be checked each tax year.

How much must be paid into the pension?

Under current rules, minimum contributions are based on qualifying earnings.

The minimum total contribution is 8 percent of qualifying earnings, made up of:

• At least 3 percent from the employer

• The remaining percentage from the employee

The employee’s contribution is deducted from their pay through payroll.

Qualifying earnings are usually earnings between set lower and upper limits, rather than total salary.

Full details of contribution rates are available here:
https://www.thepensionsregulator.gov.uk/en/employers/managing-a-scheme/contributions

What is the employer’s responsibility?

As an employer, you must:

• Choose a qualifying pension scheme

• Enrol eligible employees

• Write to employees explaining their rights

• Deduct and pay contributions on time

• Complete a declaration of compliance with The Pensions Regulator

• Re enrol certain employees every three years

Even if payroll is outsourced, these duties remain your legal responsibility.

What happens if you do not comply?

The Pensions Regulator can issue:

• Warning letters

• Fixed penalties

• Daily fines

Workplace pensions are not optional for eligible employees, and ignoring duties can become costly.

How payroll fits into auto enrolment

Payroll plays a key role in:

• Assessing employees each pay period

• Calculating pension contributions

• Deducting employee contributions

• Reporting contributions

However, you must ensure that:

• A pension scheme is in place

• Contributions are paid to the provider on time

• Any required declarations are completed