Growing your business
Intuit QuickBooks Small Business Index, December 2023
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TAX AND PENSIONS
As a small business owner, you should know about auto enrolment and what it means for your organisation.
Put simply, this is the process of putting eligible staff onto the workplace pension scheme and ensuring the business is contributing towards it. It is classed as automatic enrolment as you have the duty to enrol eligible staff from the day they start working for you.
If they aren’t eligible for the pension scheme you have chosen, there may be other duties you’re responsible for.
There are a few things you’ll need to set up, so it’s a good idea to have a strong understanding of what your duties are. Here, we’ll go through a list of responsibilities to help you work out what your auto enrolment timeline could look like.
Time is a key factor in making sure you’re compliant with auto-enrolment. We recommend reading through this guide to familiarise yourself with the processes before you dive in, ensuring you give yourself plenty of time to set everything up for your employees.
Your staging date can be defined as the day when you, the employer, need to start making contributions to your staff pensions. However, there are a number of things you’ll need to do in order to make this deadline.
Before you get started, it’s a good idea to understand what it is you have to do. If you’ve paid employees on or before 30 September 2017, you’ll have a staging date. However, if you’ve paid your first employee after this date, you’ll have a duty start date instead. You’ll be able to find out both dates from The Pensions Regulator.
Your duties start date is the day your first employee starts working for you, and this is when your legal duties begin. This is also when you’ll need to start contributing to their pension scheme, if eligible, which will be included in the first paycheck.
The Pensions Regulator will then write to you to confirm your declaration of compliance deadline, which is when you need to prove you’ve met your legal duties for automatic enrolment.
This is a legal duty which must be completed even if you don’t have any staff eligible for the pension scheme.
It’s a good idea to choose your pension scheme as early as possible so it’s ready in time for your duties start date. Take a look at the benefits, such as interest rates, and pick one that works best for your business needs.
You should also ensure any existing payroll systems you have in place can be used for automatic enrolment. If you’re using a simple Excel spreadsheet for your finances, now is a good time to invest in accounting software.
QuickBooks accounting software makes it easy to manage your payroll and can be easily set up to deal with your chosen pension scheme - a win-win.
We suggest getting these set up in plenty of time so you’re not left scrambling at the last minute.
Employees are eligible for auto enrolment if they:
Are aged at least 22 years, but under the state pension age
Have the right to work in the UK
Are not currently in a workplace pension scheme
Meet the earning threshold
They will also be covered even if they:
Are on a short-term contract
Are paid by an agency
Are away on maternity, adoption or carer’s leave
The earning threshold for automatic enrolment changes every year, based on reviews by the Department for Work and Pensions (DWP). Changes take place at the start of the tax year, on 6 April.
Auto enrolment is triggered by how much individual employees earn. The earning threshold for the 21-22 tax year is triggered by those who earn £10,000 annually.
You’ll also need to notify your staff of the auto enrolment regime, so it’s a good idea to confirm things like address and other contact details in advance.
Your staff should be notified about the auto enrolment scheme within six weeks after the duty start date.
Within five months after your duties start date, you need to declare that you’ve complied with the auto enrolment regime.
Even though this is a legal duty, it doesn’t need to be daunting. It’s simply there to give you the opportunity to explain how you’ve met all the duties.
You can start this process any time after receiving the deadline from The Pensions Regulator, but you must not complete it after this deadline. If you don’t submit your declaration of compliance, you run the risk of being fined.
The declaration of compliance is completed online and takes around 15 minutes to complete.
If you’re worried about completing the form, you can ask for help. Your only legal duty is to make sure that it’s completed and submitted on time, and that the information is accurate.
At QuickBooks, we’ve teamed up with The Pensions Regulator’s Andrew Fleming to produce a video which gives you a great summary of the importance of an auto enrolment timeline.
It takes the hassle out of workplace pensions, so you can minimize the challenges for your business.
Feel you understand auto enrolment a little better? Then check out our other posts. The QuickBooks blog covers a wide range of business-related topics – it’s all part of our mission to help small businesses grow.