Q. I’m a small employer and am yet to implement my workplace pension scheme. What do I have to do?
A. Charles Counsell, Executive Director of Automatic Enrolment, The Pensions Regulator
This year, around 700,000 employers will see the start of their workplace pensions duties and this will include care sector employers.
Under the law, all employers must put certain staff into a workplace pension and make contributions into it. The roll out of automatic enrolment started in 2012 and this year marks the largest number of employers to see their duties start. If your duties have not already come into effect, you are likely to see them start this year.
There are around 8,500 employers who manage care homes across the UK and like many sectors who have temporary, part time and lower paid staff, the care sector is one that is at risk of failing to meet their legal duties. This is because employers may wrongly assume they will not have duties in respect of these types of staff and are unclear how the law affects them.
While we know the vast majority of employers want to do the right thing for their staff, there will be some employers who do not relish the task. We also recognise the care sector has unique challenges, including financial pressures, and that it has many other statutory duties to meet and regulations to abide by. However, automatic enrolment is the law and applies to all employers, including people who run all types of care facilities. Workplace saving is now the norm and staff expect to save for a pension.
The Pensions Regulator (TPR) is responsible for ensuring employers comply with the law. It provides plenty of information and tools to help employers understand how the law applies to them and what they need to do to comply, so that staff get the pensions they are entitled to.
When do I need to implement automatic enrolment?
Every employer has a staging date which is a date set in law and is specific to them. It is when their workplace pensions duties start. TPR recommends that employers start preparing for automatic enrolment 12 months before their staging date. This means you will have time to understand how the law applies to your business and to meet your deadline to comply.
TPR will write to you well in advance of your staging date so that you have enough time to get your plans in place. The communications include an essential guide. Don’t ignore communications from TPR as all employers will have duties. You can also check when your duties start by heading to TPR’s online Duties Checker tool.
Larger employers have already passed their staging dates, as well as a number of smaller employers, including those who run care homes. Others should now be well underway with their plans. The majority of small employers, however, will see their duties start over the coming 12 months.
What do I have to do to meet my workplace pensions duties?
Your workplace pensions duties will vary depending on whether or not you have staff to put into a pension. Using TPR’s Duties Checker takes just five minutes and you will be able to find out what you will need to do and when.
Broadly, you will need to check which staff must be put into a pension. These are staff who are aged 22 and over and under State Pension Age, who earn more than £10,000 a year or £192 a week. You must write to all your staff individually to tell them how automatic enrolment applies to them. Even if a member of staff is not eligible for automatic enrolment, you must write to them so that they have the option to join a pension. To help employers with this task, TPR provides template letters on its website.
If you have staff who must be automatically enrolled, you will need to choose a pension scheme that can be used for automatic enrolment. TPR has easy-to-understand information about which schemes employers can use, including a list of providers that employers can choose from. There is also a checklist of questions you should ask potential pension providers.
Choosing a scheme need not be difficult, but you should leave enough time to make your decision so that you choose a scheme that is right for your organisation and your staff. More information about choosing a pension can be found on the TPR website.
You will also need to ensure the payroll software you use is suitable for automatic enrolment and is compatible with your chosen pension scheme.
If someone else is managing automatic enrolment for you, you can nominate them as an additional contact with TPR. This person will receive tailored information from TPR. Just make sure TPR has the right contact details for you and anyone assisting you.
Five months after your staging date, you must complete and submit a declaration of compliance. Do not forget to do this as it is a legal requirement and tells TPR what you have done to meet your duties.
How long does automatic enrolment take and how much will it cost?
Smaller employers TPR spoke to spent around 10 hours over a 12-month period before their staging date, carrying out their automatic enrolment tasks.
These employers said that taking the time to first read the step-by-step guide on the TPR website saved them time overall.
The time and cost of automatic enrolment will vary from employer to employer, TPR research of micro-employers – with between one and four staff – showed that 60% of them had no set-up costs. Those that used a business adviser paid around £400.
Set-up costs will depend on various things, including whether and how you use a business adviser, how you run your payroll and which pension scheme you choose.
Costs will also vary if you have more staff, as some providers or business advisers may charge based on the number of staff. Costs may also vary depending on where your business is based. More information on understanding your costs can be found on the TPR website.
There is a risk of paying more if you leave your plans to the last minute, so allow plenty of time to shop around for providers and services, so that you find a scheme that is right for your business and your staff.
It is also worth noting that there is no financial benefit to complying late. Employers who fail to comply by their deadline will need to pay any outstanding contributions back into the scheme so that staff do not lose out.
What happens if I don’t comply?
TPR takes an educate and enable approach and wants to help employers meet their duties. However, it will use its enforcement powers where an employer ignores their duties and is deliberately non-compliant.
When TPR becomes aware an employer is non-compliant, it usually sends a compliance notice. This tells the employer what they need to do to comply and sets a deadline for action. Failure to act may lead to a fixed penalty notice, which is a £400 fine. It is worth noting that even if you subsequently go on to meet your duties, you will still have to pay the fine.
Employers who continue to fail to meet their duties are at risk of an escalating penalty notice. This means they will have a deadline to comply before the start of a daily fine. This is between £50 and £10,000 a day, depending on the size of the employer.
The vast majority of non-compliance is because employers have left tasks to the last minute, so it is essential to start planning in good time. If you find that you have missed your staging date or are concerned that you will not meet your duties on time you should contact TPR immediately – don’t wait for a fine. More information on what happens if you don’t comply can be found on the TPR website.
Charles Counsell is Executive Director of Automatic Enrolment at The Pensions Regulator. Email: firstname.lastname@example.org
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