Auto Enrolment (AE). What is AE
For the first time ever, employers will be required by LAW to automatically enrol all eligible workers into a workplace pension scheme that meets certain minimum standards and to make a contribution to this pension scheme, adding to the contributions made by their workers.
Who is affected by AE
Auto-enrolment is already some months old as it was introduced on 1st October 2012. The largest employers, those with 120,000 or more workers, were the first to be affected.
Small and medium-sized employers will follow over the next few years up to February 2018. New employers established after April 2012 will be the last to be affected.
When will AE affect small business?
The Pensions Regulator notifies the employer 18 months before what is known as their ‘Staging Date’, the date by which they will need to enrol eligible workers into a workplace pension. The employer can choose to postpone for up to three months, with certain conditions. You have four months from your staging date to complete registration with The Pensions Regulator and provide certain information about how you’ve complied with your automatic enrolment duties.
Which workers are affected by AE
Employers will automatically enrol workers into a workplace pension who are:
• Not already in a qualifying pension scheme
• Aged 22 or over
• Under State Pension age
…and who earn more than £10,000 a year (a figure that will be reviewed annually), and who work or usually work in the UK. Workers can opt out of a workplace pension at any time, but if they do, they will lose out on their employer’s contribution and associated tax relief from the government. If a worker does opt out or stops paying into the workplace pension, their employer has a duty to automatically enrol them back into their pension scheme at regular intervals, usually every three years, to give them the chance to reconsider their pension saving options. They can choose to stay in or opt out again.
AE is mandatory by Law
There is no opting out for employers in introducing auto-enrolment. It is important to note
that there will be no exemptions for small businesses; the reforms must be applied even if you employ a single worker. Moreover, The Pensions Regulator has the power to issue a compliance notice and an employer may be subject to a fine not exceeding £50,000 for breaching the Pensions Act.
The pension regulator can issue the following penalties:
A fixed penalty notice will be issued if you do not comply with statutory notices, or if there’s sufficient evidence of a breach of the law. This is fixed at £400 and payable within a specific period.
They can also issue an escalating penalty notice for failure to comply with a statutory notice. This penalty has a prescribed daily rate of £50 to £10,000 depending on the number of staff you have.
They can issue a civil penalty for cases where you fail to pay contributions due. This is a financial penalty of up to £5,000 for individuals and up to £50,000 for organisations.
Where employers fail to comply with a compliance notice or there is evidence of a breach, ADP can issue a prohibited recruitment conduct penalty notice. This penalty has a prescribed rate of £1,000 to £5,000 depending on the number of staff the employer has. ADP aim to fully recover all the penalties that we issue. For More information, Please contact ADP's FREE Auto Enrolment help line. Tel: 0208 886 9222 - email: [email protected]