Workplace pensions mandates that every employer in the UK put those employees who qualify into a pension scheme. This is also referred to as Auto enrolment also requires that employers contribute into this pension scheme. As an employer, auto enrolment is part of your legal duty and it starts the day you hire your first employee.
The Pensions Regulator is the UK regulator of all workplace pensions schemes. It provides guidance on your duties as an employer, how to choose a provider, how to communicate to employees and so on. For details, check out The Pensions Regulator website.
Here’s an outline of the steps you follow to auto enrol for a pensions scheme:
- Choose your pension provider, if you don’t have one already set up.
- Find your staging date (or your duty start date), or the date that your workplace pension duties begin.
- Set up a workplace pension.
- Communicate with your employees.
- Add your employees to the workplace pensions scheme.
- How to opt out and refund employees.
- Send the declaration to The Pensions Regulator stating that you have met your duties.
- Re-enrolment and re-declaration.
Choose your pension provider
You need to provide a pension to your eligible employees as soon as possible. If you are looking to hire an employee for the first time and they are going to meet the age (over 22 under State Pension Age) and wage (over £10k per annum or the monthly/weekly equivalent), you will need to arrange one within 3 months of their start date.
It's recommended that your pension scheme meet the auto enrolment requirements. Choose a pension provider that has a qualifying criteria and allows auto enrolment.
In QuickBooks Online, we have a list of some of the more popular pension providers that meet auto enrolment requirements. This is not an exhaustive list, and we recommend that you select a pension provider that best suits your and your employees' needs. QuickBooks does not receive financial payments from any provider.
You can use your existing pension scheme or choose a new one that meets your needs. For more information, see Choosing a pension scheme on The Pensions Regulator website. It provides a step-by-step guide for small employers to find a pension provider.Back to top
Find your duty start date/staging date
Your duty start date or staging date is when your auto enrolment duties begin for you as an employer. Whether you have a duty start date or staging date depends on when you start paying your first employee under PAYE.
- Duty start date
If you pay your first employee after 30 September 2017, you'll have a duty start date instead of a staging date. You should have received a letter from The Pensions Regulator with details about your duty start date.
- Staging date
If you've paid employees on or before 30 September 2017, you'll have a staging date, which you can find in a letter sent from The Pensions Regulator about auto enrolment. You can also find your staging date on The Pension Regulator's website by entering your PAYE reference.
What else should I know about employing staff for the first time and where can I find my PAYE reference?
You can find your PAYE reference in the booklet that HMRC sent you when you first registered as an employer or in other communication from HMRC. You can also find it on any payslip, P45 or P60 that you might have given your employees. Your PAYE reference can also be found on a P6/P9 coding notice or your P30BC white payslip booklet.
You can postpone when you must auto enrol eligible employees up to 3 months. The duty start/staging date remains unchanged. See The Pensions Regulator for more information about postponement. For more information on staging and duty start dates, read the Employer's section of The Pensions Regulator.
What happens if I don’t comply or if I’m late to auto-enrol?
The Pensions Regulator is strict about you meeting your legal duties as an employer for auto enrolment. If you don’t comply, there will be actions taken against you. Before you face enforcement and fines, you will get a warning letter and then a statutory notice telling you to comply. If you’ve missed your auto enrolment start date, you have to inform your employees and allow them to back-date their contributions. You, in turn, will also have to back-date and pay any contributions you might have missed. For more details on non-compliance or paying late, including enforcement for not meeting your duties, see what happens if I don't comply on The Pensions Regulator website. Back to top
Set up workplace pensions
You can set up your workplace pension place during your payroll setup. If you don't, you will be prompted to enter your pension scheme details if you have eligible employees during a payroll run. You can set it up in the following places:
- During setup, you will be asked which option best describes your employees. If you select My employees are between 21-SPA years old and they earn more than 10k/year or the equivalent pay period, the next step is to set up your pension scheme.
- During a payroll run, you’ll be prompted to auto enrol. Select Enter pension details.
- To do it later, go to the Gear icon > Company Settings > Payroll.
- You may also see reminders about your duty start/staging date date on the Payroll home page, select Employees or Payroll menu > Payroll, then select Set up policy.
When setting up your payroll for the first time, if you answer Yes to Do you already have a workplace pension plan? you will be asked to fill in details for your pension.
- Enter your provider information:
- Select your provider. If you don’t have a provider, see Choose a pension provider. We also provide a list of some of the more popular pension providers that meet the requirements. If you choose another pension provider select Other and enter their details.
- Enter the Provider reference.
- Enter the Group (if applicable). This may be called something slightly different, depending on your pension provider (for example, Group, Group ID, Contribution Group or even Pay Code). It is a secondary identifier used by the Pension Provider to make sure the pension contributions are going to the correct place.
- Choose whether you will use the employee earnings threshold for auto enrolment. Note: Earnings threshold is sometimes called qualified earnings). Select this option only if you chose this option when you set up your pension scheme with your pension provider. Employee earnings threshold will use defined limits to calculate the pension contributions for you and your employee. What's the earning threshold? Qualifying earnings Annual Lower level £6,240 Trigger for auto enrolment £10,000 Upper level £50,270 See the Earnings thresholds for the current year on The Pensions Regulator website.
- Choose the type of taxation method. Select one of the options. Work with your pension provider if you’re not sure which method to choose. You may also want to check with your pension provider about which tax method they use.
What do these taxation methods mean?
- Net pay arrangement – pension contribution is deducted before taxes and NICs. The pension contribution is taken from gross pay (before taxes). This reduces the employees taxable pay by the amount of the employee contribution. This method allows for immediate tax relief and is best for employees who are higher or additional tax payers.
- Relief at source (including tax relief) – pension contribution is deducted after deducting tax and NICs, that is the pension contribution is from the employee’s net pay. The pension provider claims basic tax relief (currently 20%) back from HMRC. In order to meet the minimum requirements, the pension provider adds the basic tax relief it receives.For example, for a 1% employee contribution, the employee pays 0.8% and the pension provider claims the other 0.2% from HMRC
- Relief at source (excluding tax relief) – pension contribution is deducted after deducting tax and NICs, that is the pension contribution is from the employee’s net pay. However, the employee pays the entire 1% employee contribution. The pension provider still claims the basic tax relief (currently 20%), so in effect the employee has a larger contribution to their pension pot. Relief at Source is suitable for employees who are basic tax payers. If a higher or additional tax payer is on a Relief at Source taxation method, they can claim the additional tax relief via a self-assessment.
- Enter the default contribution rates. Rates that you enter during setup apply to everyone in the company. Note that your employer and employee contribution rates must already be defined with your pension provider. If you want to change the contribution rate for a specific employee, you can do so when you run payroll.
Remember that you are required to contribute the same amount, based on regular pay, into an employee's workplace pension while the employee is on statutory leave.
What are my employer contributions? Pension contributions are a fixed amount or a percentage of the employee’s pay. Employers must pay a minimum contribution into their employees’ pensions scheme. Minimum contributions are currently 5% with employers paying a minimum of 3%.
- Choose the Pensionable pay types (this option is available only in Settings) you want to include in your pension earnings. These are the earnings you selected during your set up with the pension provider. Pensionable earnings will always include salary or wages, but you might have chosen to include other earnings such as bonus, overtime or even statutory pay. Check with your pension provider if you're not sure what you've chosen as Pensionable Pay.
- Eligible employees will be automatically enrolled into the pension when you run your payroll.
Communicate with your employees
Add employees to workplace pension
All eligible employees must be enrolled in the pension scheme. The eligibility for enrolment depends on the employee’s age and earnings. Earnings are also known as Qualifying Earnings. This includes salary and wages, and might also include commission, bonus, overtime, statutory sick, statutory maternity, statutory paternity, statutory additional pay or anything else that can be considered as earnings. You can turn off the pay type in Settings under Pensionable pay types.
We assess all employees and auto enrol the eligible employees into the workplace pension scheme. If you have a duty start date/staging date, but don’t have any other information entered, we give you the option to set up your workplace pension scheme details later. If you don’t have a duty start/staging date, then we cannot complete the assessment as we will not have the relevant information employees to a workplace pension.
We assess employees who are not already enrolled into the workplace pension each time you run payroll. We then auto enrol employees as they become eligible straight into the workplace pension scheme. You have the option to change the contribution or postpone enrolment.
If you haven’t set up a workplace pension scheme, then we give you the option during your payroll run to enter your duty start/staging date and other information, as described in Set up auto enrolment.
If you already have assessed employees using other payroll software, then be sure to answer the following questions about the auto enrolment status as you add each employee.
What do I need to know about opting out?
Once an employee has been auto enrolled, they have the option to opt out.
- The employee MUST contact the pension provider within a set period. Your pension provider will give you details on this process.
- As an employer, you cannot influence the employee into opting out. It is illegal to put pressure in any way on the employee.
- If the employee does opt out in the correct manner, then your pension provider will provide details of a valid opt-out.
- If there is a valid opt-out, then any pension contributions deducted from the employee must be refunded on the next available payroll run.
- You as an employer will also receive a refund of any employer contributions paid to the pension provider.
An employee also has the option to cease their membership at any time which must be through the pension provider. The difference is that the monies contributed by the employee, and you as an employer, remain as a 'pension pot' with the pension provider.
What are the different worker categories?
Based on how much an employee earns each pay, we assess whether the employee is eligible and also adjust the amount that is added to the pension scheme. All workers have the right to join, but only eligible workers must be auto enrolled. Your duties as an employer cover both eligible and non-eligible job holders.
|Eligible Job holders||Must be auto enrolled Employer obliged to pay the contribution|
|Non‐eligible Job holders||Have a right to opt in Employer obliged to pay the contribution|
|Entitled workers||Have a right to join Employer is not obliged to make a contribution|
How would I know which workers are eligible?
Based on the information in the employee’s profile, we assess whether the employee is eligible and list only those who meet the criteria. The basis of eligibility is shown in the following table. Categories of worker relative to age and earnings
|Earnings||Age (inclusive) 16-21 22-SPA* SPA*-74|
|Lower earnings threshold or below||Entitled worker|
|More than lower earnings threshold up to and including the earnings trigger for automatic enrolment||Non-eligible jobholder|
|Over earnings trigger for automatic enrolment||Non-eligible jobholder||Eligible jobholder||Non-eligible jobholder|
|*State pension age|
Can I postpone who to put in the pension scheme?
You can postpone who to add to the pension scheme. However, postponement does not change the duty start/staging date date. You must write and inform the employee whose automatic enrolment you’re postponing, and you must let the employee know within 6 weeks from the date enrolment starts. You can postpone auto enrolment from:
- Your duty start/staging date for any existing workers.
- The first day of employment for any new starters after the staging date/duty start date.
- The date an employee becomes eligible for auto enrolment.
Postponement suspends the duty of assessment and automatic enrolment, but not all the employer duties.
- You can postpone up to a maximum of 3 months.
- The postponement period doesn’t have to be the same for all employees, but there can only be one postponement at a given time for an employee.
- Jobholders have the right to opt in or join during postponement.
- You must communicate the postponement to the employee. For your convenience you can use the letter template.
How to opt out and refund and employee
According to the The Pensions Regulator website, any time an employee opts out of an auto enrolment pension, they are entitled to a full refund of any contributions which they have made into the pension scheme within a month of receiving a valid notice.
Follow the steps below to opt out an employee from auto enrolment in QuickBooks Online Standard payroll.
- Go to Employee and click on the employee's record.
- Select Workplace Pension .
- Using the toggle, turn off Enrolled in pension .
- Choose Opt Out and then enter the effective opt out date.
Once complete, the employee will receive a full refund for any pension contributions they are entitled to.
Note: In rare circumstances where an employee wants to opt out of auto enrolment but a refund isn't due, choose Cease Membership in step 4 and no refund will be calculated. Please contact your pension provider for further assistance.Back to top
Send the declaration to Pensions Regulator stating that you have met your duties
Within 5 months of your staging date/duty start date, you must complete the online Declaration of Compliance.
The Declaration of Compliance informs The Pensions Regulator that you have met your automatic enrolment duties. It is an employer’s legal duty to complete the declaration, although you can delegate it to an agent or accountant or to your pension provider. Make sure that you know who is going to make the declaration. The declaration is a secure, online service accessed through the Government Gateway.
If you do not complete this on time you will be subject to fines and penalties.
Re-enrolment and re-declaration
As part of the ongoing employer duties, every 3 years after your initial duty start/staging date you will need to reassess all employees who have opted out or ceased their membership in the preceding years. You're able to select the exact re-enrolment date within a 6 month window.
There are similar requirements to inform employees who may have opted out or choose to cease their membership that they will be reassessed, and if applicable, re-enrolled. There's also a duty to complete the Declaration of Compliance with The Pension Regulator. Find out more about re-enrolment and re-declaration here.