Workplace pension schemes

Workplace Pension Schemes – challenges for small businesses

4 min read

You’ll no doubt be aware by now of the new auto enrolment pension arrangements, which will affect all UK employers. These new regulations require employers to sign up all eligible employees into a qualifying pension scheme. Employees and employers must both make contributions, making it a kind of compulsory employer-assisted savings scheme.

Responsibilities…

Workplace pension schemes place quite some responsibility on employers. The amount of things you need to know is quite a challenge.

As a small business owner, you must first ensure your staff understand their entitlements. They need to make an informed decision about whether they want to enrol or not – and it’s your responsibility to make sure they have enough information to make this decision. Once they’re in, you need to tell them all about the pension, who operates it, the level of contributions being paid in, and how it works.

Let’s not forget the scheme itself. If you don’t already have one in place, you’ll need to set one up. Then you’re also responsible for registering with the UK Pensions Regulator, giving them details of your qualifying scheme, and the number of people that you’ve automatically enrolled.

Find out who qualifies

Employees fit into three categories - eligible, entitled and non-eligible. As a small business owner, you’ll need to carry out a worker assessment to judge who falls into which category.

Simply put, any qualifying employee must:

  • Work in the UK
  • Be aged between 22 and State Pension age
  • Earn more than £10,000 each year
  • Not belong already to a qualifying pension scheme

Your staff can also choose to opt out if they prefer. Once you know who must be enrolled, you can calculate how much you’ll need to pay into their scheme each payday. And you’ll need to keep them informed.

Make sure you comply

It’s important that people save for their retirement and making this easier is undoubtedly a good idea. But it does present challenges for business owners. Keeping on top of changing government employee legislation and red tape is an uphill battle that requires constant monitoring.

Get it wrong and you might easily incur avoidable penalties. And by the way, ignorance is no excuse when it comes to any errors or non-compliance.

This is where the trusted advice and guidance of your accountant comes in.

Get the payments right

Feeling the strain already? Adding complicated pension calculations to your to-do list might well be the tipping point.

But you can make it all so much simpler for yourself if you use online accounting software. QuickBooks Online Payroll will help to take the strain. It also ensures the transition to auto-enrolment – and subsequent administration – runs as smoothly as possible.

Payroll co-ordination is key. Your accounts staff must be kept up-to-speed on deducting contributions, managing the opt-out process, calculating contributions from both staff and employer, and changing these in line with government adjustments to qualifying earnings. QuickBooks Online covers all these aspects of your workplace pensions, automatically.

Stay in control

Clearly, having precise control over your payroll function is vital for accurate calculations and for ongoing administration. It’s often wise to seek the professional advice of your accountant, alongside investing in accounting software such as QuickBooks Online Payroll. Not only will you have more control, it’ll take the pain out of the process.

Alice, a QuickBooks customer with her own marketing consultancy, recently hired her husband to take on a part-time admin role. Her accountant (with his extensive knowledge) helped them set the salary at a tax efficient rate, below the auto-enrolment threshold. And QuickBooks Online Payroll took care of the rest.

For more information on auto-enrolment and how it affects your business, download our comprehensive auto-enrolment guide here.

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