Introduction to auto-enrolment for employers
New pensions regulations came into force on 1 October 2012 that mean every employer with at least one member of staff has a duty to enrol eligible employees into a workplace pension scheme and contribute towards it.
What does this mean for employers?
If you are employing staff for the first time, your legal duties for automatic enrolment begin on the day your first member of staff starts work. This is known as your 'duties start date'. Each month there will be around 16,000 new businesses that will need to put eligible staff into a pension scheme as soon as they are hired.
The Pensions Regulator has produced an auto-enrolment tool that takes you through the steps you will need to take to comply with your auto-enrolment and ongoing re-enrolment duties.
There is information on:
- Duties of employers
- Duties of people employing personal care assistants, or other people in their home
- Duties if you employ someone who doesn't meet the criteria to be put into a pension scheme
- What happens if you don't comply
- Automatic re-enrolment
The responsibility for complying with the employer duties ultimately rests with the employer. SMEs that do not face up to their duties until the last minute risk facing a capacity crunch and hefty fines. There are spot checks on employers across the UK to make sure they are complying with their workplace pensions duties.
Employers need to complete a Declaration of compliance within five months of their duties start date to tell the Pensions Regulator how they have met their duties - this applies whether you had anyone to put in a pension or not. The Pensions Regulator has a Declaration of compliance checklist on their website to help.
Help and support
Questions and answers
Are you a single-director or director-only company?
In some cases, directors may be exempt from duties under automatic enrolment, even if they have an employment contract. If you receive a letter from The Pensions Regulator but think you are exempt, you should let The Pensions Regulator (TPR) know.
Are you due to submit your Declaration of Compliance?
Employers need to complete The Pensions Regulator's declaration of compliance online form within five months of their staging date (or duties start date). Those who do not could be fined.
The Pensions Regulator provides the following information to help employers complete the form:
Are you employing temporary or seasonal staff?
If you are planning on taking on seasonal or temporary staff, or have staff whose pay and hours fluctuate, you will have automatic enrolment duties for these staff. You must assess them individually every time you pay them. This includes staff who work for you for a few days, a few weeks or several months.
If you know that any of your staff will be working for you for less than three months, then you may choose to use postponement. Postponement allows you to delay the assessment or enrolment of a worker for up to three months.
You can postpone as many or as few staff as you like and the postponement period doesn’t have to be the same length for everyone. However, note that staff can also choose to opt in to their employer’s pension scheme during the postponement period.
Companies with no staff – what action to take?
Companies with no staff other than directors (e.g. ‘husband and wife’ companies) may not have any automatic enrolment duties.
If you receive a letter from the Pensions Regulator but have no staff, use the Regulator's online form to explain your circumstances.
Do you employ a carer or personal assistant?
All employers are legally required to automatically enrol certain staff into a pension scheme and make contributions. This includes those who directly employ one or more people to provide care or personal assistance.
The Pensions Regulator has specific information and guidance for those that employ personal assistants and carers:
Do you know what you need to communicate to your staff?
Within 6 weeks of the date that your automatic enrolment duties begin (your staging date), you must tell your staff how automatic enrolment applies to them as individuals. It’s important to note that even if the communications are being managed and sent by a third party (for example, by your payroll provider, pension provider, or business adviser), the legal responsibility for communication with staff rests with you – the employer.
Do you know what you need to know about payroll?
If the payroll system that you use is ready for automatic enrolment and compatible with other systems, you’ll find the automatic enrolment process much easier to implement and run on an ongoing basis.
Payroll software can simplify the process of assessing your staff and providing information about them to your pension provider. If you don’t already use payroll software, you may want to consider doing so.
If you use payroll software, check that it is designed to carry out all the automatic enrolment tasks to help you comply with your ongoing duties.
Does COVID-19 impact auto-enrolment?
The Pensions Regulator has produced COVID-19 guidance for employers:
Automatic enrolment duties continue to apply as normal, including re-enrolment and re-declaration duties and paying contributions.
Employing staff for the first time?
If you are employing staff for the first time after 1 October 2017, your legal duties for automatic enrolment begin on the day your first member of staff starts work. If you have eligible staff to put into a pension scheme, you will need to identify a provider and also ensure your chosen payroll solution is compatible with the scheme so that staff receive the pensions they are entitled to on time. You should leave plenty of time to do this.
The Pensions Regulator (TPR) recommends that employers nominate a contact, as their research indicates that employers who nominate a contact are more likely to comply with their duties and less likely to be fined. Nominating a contact also means that TPR can send you helpful automatic enrolment reminders.
Within five months of taking on staff, employers must complete a declaration of compliance to tell TPR what they have done to meet their duties.
New employers risk a fine if they do not comply with the law on time. If you have staff that you need to put into a pension scheme, but have missed your automatic enrolment duties start date, then what you’ll need to do will depend on how late you are in setting up your scheme and putting staff into it. If you are more than six weeks past your duties start date, you will need to backdate any missing contributions. The Pensions Regulator has information and guidance on what to do if you have missed your duties start date.
Have you been offered a fake exemption certificate?
Employers should be wary of falling for a scam involving the sale of fake certificates that suggest they do not have workplace pension duties.
The Pensions Regulator have investigated at least one company offering what it describes as “Certificates of Auto Enrolment Exemption” to employers. If you are contacted by a scammer, you should let the Pensions Regulator know.
Have you nominated a contact?
The Pensions Regulator asks that employers nominate a 'employer contact', who should be the business owner or most senior person. You may also want to nominate an 'additional contact' if someone else will be carrying out the day-to-day tasks of managing automatic enrolment. The Regulator will send letters and emails keeping you up-to-date with which tasks you need to complete and by when.
Employer contact: This is the most senior responsible person at the employer, or the business owner, who is legally responsible for ensuring compliance with automatic enrolment duties. In a small business, this is likely to be the business owner.
Additional contact: If someone else manages the day-to-day tasks of automatic enrolment on your behalf (e.g. another member of staff, accountant, payroll provider or other business adviser) you can confirm that person as your ‘additional contact’ to receive help and guidance by email.
How can you choose the right pension scheme for your staff?
The Pensions Regulator (TPR) has issued guidance to help employers select a pension scheme for automatic enrolment. The interactive tool which guides you through the auto enrolment process gives tailored help on choosing a pension scheme, according to whether you run a business, employ a personal care assistant, or employ people in your home.
How does auto-enrolment affect LLPs?
A Supreme Court ruling in May 2014 opened the possibility that partners of an LLP might be considered to be workers for automatic enrolment purposes.
However, from 6 April 2016 if someone is genuinely a partner, there is only a discretion rather than an obligation to auto-enrol them, under Regulation 5EB of The Occupational and Personal Pension Schemes (Automatic Enrolment) Regulations 2010 (as amended by The Occupational and Personal Pension Schemes (Automatic Enrolment) (Miscellaneous Amendments) Regulations 2016). LLPs need to apply HMRC’s Salaried Members Rules to identify those members who are more like employees than like partners in a traditional partnership, in order to ascertain whether their duty is discretionary.
Re-enrolment: are you aware of your ongoing duties?
Part of an employer’s ongoing duties includes the requirement to re-enrol every three years. This is when those staff who either opted out of their workplace pension scheme or ceased to be members need to be reassessed, and re-enrolled into a workplace pension scheme if they meet certain criteria. Employers will need to write to the staff this applies to, to tell them what has been done, and they’ll also need to re-declare their compliance to The Pensions Regulator (TPR).
Make sure you complete and submit your re-declaration on time - or you run the risk of a fine. TPR carries out regular spot checks around the country to ensure employers are complying with their automatic enrolment duties.
Keeping up to date
Updates from the ICAEW and the Pensions Regulator on auto-enrolment are available from our guidance and support page.
ICAEW and the Pensions Regulator offer a range of courses, Q&A sessions and webinars on auto-enrolment. Details of upcoming events and past webinar recordings can be found on our auto-enrolment events page.
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