Getting ready for pensions auto-enrolment

There’s only a year to go until the pensions auto-enrolment legislation comes into force in October 2012. As an employer, you may have heard of automatic enrolment, but research has shown that the majority of employers have yet to make any auto-enrolment plans¹. So, why should you be thinking about auto-enrolment planning now? 

Forward planning is vital

Almost all employers with workers in the UK will be affected, so you’ll need to make sure that your recruitment and employment practices are compliant by the relevant staging date for your business. This will be October 2012 for the largest employers. You’ll also need to be ready to begin automatically enrolling your workers into a compliant pensions scheme by the dedicated staging date (as defined by the number of members of your PAYE scheme). If you're an employer with less than 3,000 members in your PAYE scheme, then it's likely that your compliance start date will be pushed back by a year. We're awaiting further clarification on the details from the Department for Work and Pensions in early 2012.

As a result of the legislation being drafted over many years (and two different governments), it's become very complex with many nuances that can lead to accidental non-compliance. You’ll need to have a clear grasp of your legal duties. To do this we can carry out a full review of your workforce to understand the existing contractual relationship with the worker and the reward package which they’re entitled to. 

Choosing the right contribution level

One particular issue you’ll need to think about will be choosing a compliant contribution level. One option is for contributions to be based on qualifying earnings, which are defined as salary, wages, commission, bonus, overtime and statutory pay between £5,715 and £38,185. There are alternative contribution structures that require contributions based on base pay or total pay. You’ll need to consider the various costs (for example, from contributions, payroll systems, communications and legal costs) before you can understand which option is the best for you.  

Helping you meet the challenges

There are many issues you’ll need to work through. We can sit down with you to discuss your auto-enrolment issues and assess the legal issues you might face. We work with PwC LLP to bring you the additional value of specialists with knowledge of tax, pension and payroll systems, employee benefits and internationally mobile employees. By combining our expertise we can offer advice tailored to your specific auto-enrolment needs. 

If you’d like to talk to us about auto-enrolment, you can contact Oliver Reece on 020 7213 1472 or Alex Harrison-Cripps on 020 7212 6261.

¹Standard Life survey published in August 2011