18th February 2019
By Treena Turner, Partner
Having experienced increases to minimum contributions by both employers and staff last spring, businesses will face another round from April this year. Employer’s minimum contributions will rise to 3% and staff contributions will rise to 5%. What’s more, it’s the responsibility of the employer that they are paid and should there be any shortfall, then it’s up to them to make up the difference.
Since auto enrolment was first introduced in 2012, employer’s duties have gradually increased, which means that just setting up a scheme is not sufficient. Employers must monitor staff eligibility as their salaries change and must be sure to enrol them as necessary. The amount you and your staff have to pay may vary as a result of the type of pension scheme that you’ve selected and its particular rules. For example, there may be differences due to the type of tax relief applied.
But auto enrolment can get more complicated when you start to consider the different elements of staff pay that your employees are entitled to, and if your chosen pension scheme takes them into consideration when calculating the required minimum contributions.
Firstly we would recommend that you start looking at the increases you may need to make now so that you have plenty of time should you feel you need to take some professional advice.
Consider which staff the increases apply to as it may not necessarily be all of them. Then ensure that the way you calculate contributions and make payment into the pension scheme is ready for when the changes come in. To do this, you may need to speak to your payroll provider or, if you use payroll software and process it in-house, ensure that it’s up to date and can accurately make the changes when required to do so.
Finally, don’t forget to write to your staff to let them know about the auto enrolment changes.
Are there any penalties for non-compliance? Yes, there are because it’s up to the employer to ensure that they are making the correct minimum contributions.
All in all, no one can afford to take their eye off the ball and the best thing you can do if you’re unsure is to take some advice. We have an experienced team at Wise & Co, who would be happy to help, or read more about our payroll services.
Treena is a general practice partner and has responsibility for Wise & Co’s payroll services and audit and compliance related matters. The majority of Treena’s clients are owner managed businesses spanning a wide range of industry sectors with specialisms in financial services, Solicitors Regulation Authority (SRA) Accounts Rules and charities. She trained and qualified as a chartered accountant with Wise & Co and became a partner in 2006.