Workplace Pension Small Employer Act Now

Workplace Pension Small Employer Act Now.

The Pensions Regulator has recently issued a general warning to over 1.8 million small employers on the need to act early with regard to complying with automatic enrolment workplace pension rules that come into effect from next year onwards.

Workplace pensions are a legal requirement for all employers with more than one employee and the rollout of this has been staged over the last couple of years, with the largest firms starting first and gradually this filtering down to smaller employers and micro employers with effect from 2016 through to 2017.

We echo the warning from the Pensions Regulator and suggest that you start planning now i.e.  starting around 12 months early is better than the stampede that will happen as the deadline approaches.  The contribution rates for workplace pensions from both employer and employee are detailed here:

Minimum contribution levels are being phased in between October 2012 and October 2017.

• October 2012 to September 2016 - total minimum pension contribution of 2% of qualifying earnings with at least 1% from the employer.
• October 2016 to September 2017 - total minimum pension contribution of 5% of qualifying earnings, with at least 2% from the employer.
• From October 2017, total minimum pension contribution of 8% of qualifying earnings, with at least 3% from the employer.

So by 2017 workers may be paying 4% into a pension if you do not already (plus 1% tax relief).

As a reminder the staging dates (the dates that you must have the pension scheme in place by) are detailed below to save you looking them up:

• 30 to 49 Employees: 01/08/2015 – 01/10/2015
• Less than 30 Employees: 01/01/2016 – 01/04/2017
• New Employer Start-ups (Between 2012 and 2017): have between April 2017 and February 2018 to set up auto enrolment.
• All Employer Start-ups after Oct 2017 must have auto enrolment pensions in place immediately.

If you are a ‘one man band’ you may need to apply for an exemption.  Contact us for an exemption template letter.

Cash flow management

As an employer, you cannot ignore the fact that you must have a workplace pension scheme in place.  When thinking about pay rises for your employees you should also consider the fact that in the next 18 months or so you will be required to offer them a pension scheme and to pay into it.  As an employer giving pay rises today and next year and then being faced with a minimum employer pension contribution of 3% of band earnings is going to present strain on your cash flow.

Our guidance is do not put it off sort this out before Christmas 2015 and do not agree any pay rises with your staff until you have agreed your workplace pension compliance.  We are happy to arrange this for you please contact us with our fees to arrange the same.  Make no mistake, this cannot be ignored you will be fined you do not comply with the new pension laws.