In order to increase private pension funding, the government have initiated the auto-enrolment scheme so that all employees will be automatically enrolled into pension schemes, with contributions taken from them and their employers. As 2017 looms on the horizon, small business owners must prepare for the date when they will be legally required to offer and contribute toward workplace pensions. Larger businesses have already been subject to the new legislation since 2012 but the staging dates (deadline by which you must offer workplace pensions) for small businesses vary.
Generally speaking, the larger your business is, the sooner you will be subject to the new automatic enrolment duties. The smallest of businesses and new employers might have staging dates as late as 2018. Your staging date also depends on when your business was set up, but the dates for businesses set up since 2012 are spread from May 2017 to February 2018. You can find out your precise staging date and start your automatic enrolment plan at www.tpr.gov.uk/planner.
If your employees earn less than £10,000 per annum or they are under 22 years of age, then you do not have to provide a pension scheme for them. Employees can choose to opt out if they wish, and the Department for Work and Pensions expect 15% to do just that (https://www.gov.uk/government/news/pensions-savings-9-million-newly-saving-or-saving-more-says-pensions-minister), but you as an employer have no influence over this.
This document shows you how the different bands are affected by the staging dates each quarter. Each band has a different minimum contribution requirement. The very minimum you must contribute to the scheme before the end of September 2017, is 2% of basic pay, of which you pay 1%, the government pays 0.2% and the employee contributes 0.8%. From October 2017 to October 2018, the total will increase to 8%, of which you must contribute 3%, with 1% tax relief from the government and the remaining 4% paid by the employee.
Although this whole thing may seem daunting to small business owners, there are actually some benefits. A pension scheme provides security that can reduce employee turnover. It is an employee incentive with comparatively little expense, especially since much of it is covered by the employees themselves. By contributing to employee pensions, you will also lower your National Insurance bill.
What You Must Do
After your staging date, which you can determine using The Pensions Regulator calculator, you will have certain legal obligations. You must:
- Assess eligibility of all staff at every pay period
- Set up and register an auto-enrolment approved pension scheme
- Make contributions for and enrol employees who are not eligible but wish to join
- Enrol and make contributions for all eligible employees
- Manage the automatic enrolment
- Keep records of what you have done
Balancing the books can be a stressful task at the best of times and the added confusion of auto-enrolment certainly doesn’t make matters any easier. The future of your business is dependent on your ability to manage accounts and keep an eye on spending. Fortunately there is a great bookkeeping software solution that can make this easier. If you can’t afford a professional accountant but you need help managing payroll, calculating pension contributions, and keeping tabs on inventory and supplies, then Quickbooks is the ideal solution for you. Our software also includes marketing tools, merchant services and training solutions all of which can free up time for SME owners so they can spend more time on other aspects of their businesses. You can sign up for a free 30 day trial today.