Since the introduction of auto enrolment in October 2012 it has become a requirement for employers in the UK to ensure that any eligible employees are automatically enrolled into a qualifying workplace pension scheme. This change to workplace pensions has resulted in new legal and regulatory obligations for employers and has meant that we have seen one of the biggest changes in payroll processing in recent years.
The easiest way to administer auto enrolment pension contributions is through your employees pay. As an outsourced payroll provider, Menzies can help you manage your auto enrolment pension obligations through the payroll and ensure that this is processed in line with the current legislation. This includes:
- Assessing if your employees are eligible for enrolment
- Providing statutory communication letters for your employees such as postponement notices and assessment letters
- Calculating pension contributions and processing them through employees pay
- Managing employee opt outs and processing pension refunds where necessary
- Completing the upload of pension contribution data to your chosen pension provider each month
Assessment of your employees:
There are several standards that must be met for an employee to be automatically enrolled into your workplace pension scheme:
The following types of employees must be auto enrolled into a qualifying scheme:
- Employees over the age of 22
- Employees under state pension age
- Employees who earn over the current Threshold of £10,000 per annum (or £833.33 per month)
- Employees working in the UK
If an employee becomes eligible whilst in your employment, it is your responsibility to ensure that they are enrolled into the pension scheme straight away. We will assess your employees through the payroll software to ascertain if they are eligible and will re-assess in every pay period. This means that any employee whose circumstances have changed will be automatically enrolled when they become eligible.
Statutory Communications:
As an employer you are responsible for issuing statutory communications to all employees to explain how auto enrolment applies to them. We can assess each employee and produce these communications on your behalf. These will cover all aspects of the pension enrolment including postponement notices, assessment letters, and information about opting out of the pension scheme.
Opting out of the pension scheme:
If an employee decides that they do not want to contribute to the pension scheme they are entitled to opt out. The employee must contact their pension provider within one month of enrolment if they wish to receive a refund of the contributions that were deducted from their pay. An employee can opt to cease contributions after the first month, but they will not receive a refund for earlier contributions.
After three years all employees will be re-assessed, and any eligible employees will be re-enrolled into the pension scheme. If the employee still does not want to contribute to their pension, they will need to complete the opt out process again.
Calculating Pension contributions:
The total contributions made for each employee must be a at least 8%. However, it’s worth noting that the employers’ contributions cannot go below 3% and contributions can exceed 8% if the employer or employee chooses to contribute more.
| Contributions | |
| Employer | 3% |
| Employee | 5% |
| Total Minimum Contribution | 8% |
Pension provider Data upload:
You will need to ensure that the contributions deducted from your employees each month along with your employer contributions are paid to the pension provider and allocated to each employee’s pension pot correctly. We can manage this administrative burden for you and have direct links with our payroll software to many of the larger pension providers.