Auto-enrolment, the legislation that requires all UK businesses to provide their staff with pensions, is already up and running across the country.
The emphasis now falls on getting Auto-enrolment right within small businesses.
If you have a small business with a few employees, you might think you have to contribute to all of their staff’s pension schemes – but that’s not the case.
Instead, there are clear guidelines about who can be automatically opted into a scheme and who can’t.
QuickBooks has provided a thorough guide that explains the three kinds of employee that you’ll have, as well as providing you with information on who you’ll need to Auto-enrol onto a workplace pension scheme.
A word of advice – take some time to understand the differences between the employees, because sticking to the guide could save you time and money in the future.
As you may have already guessed, this jobholder is eligible for Auto-enrolment into your pension scheme. Of course, they have the ability to opt out of the scheme, but if they choose against that and remain attached to your pension, they can expect additional contribution from you, the employer.
Eligible jobholders can be described as being between the age of 21 and State Pension Age, and earning at least £10,000 per annum.
A Non-eligible Jobholder would not be eligible to enroll into your workplace pension scheme.
However, they are able to join your pension scheme by requesting enrolment. If they exercise this right, then, as an employee, you have to place them into your workplace pension plan.
It’s a legal requirement that you inform this type of employee, who is usually between 16 and 21 years old and earns at least £10,000 a year.
Finally, we have the entitled worker, who can be between 16 to 74 years old, but, crucially, earns up to £5,772 per annum.
The eligible worker cannot be auto-enrolled onto a workplace pension, but, like the Non-eligible Jobholder, they can ask to be opted into your scheme. As before, you’ll have a legal obligation to grant your Entitled worker this right.
So, what’s the difference between a Non-eligible Jobholder and an Entitled Worker, other than how much they earn? Well, unlike the former, the latter, should they opt-in and receive a workplace pension, will not receive any pension contributors from you, the employers. Instead, their pensions will only grow if they are contributing to their own pot on a regular basis.
What’s the difference between a “Worker” and someone who “ordinarily works in the UK”?
A “Worker” in the UK is someone who has a contract to perform work and can relate to those who are on an apprenticeship, temporary or agency workers. There are no restrictions on the amount they get paid or how many hours a week they work – they will still be described as a worker.
Someone, who “ordinarily works in the UK” usually means that although they work in this country, their contract might be based in another, which can have a significant impact on who is Auto-enrolled in your business and who isn’t.
We recently interviewed Andrew Fleming from the Pensions Regulator who gives a great summary on what you need to be aware of when attempting to identify who’s eligible for Auto-enrolment. View it below.