We have taken on several clients in the last few months who were not aware of their workplace pension duties. These are governed by The Pension Regulator and failure to undertake the legal duties result in fines. So for all employers, here’s what your responsibility is.
Workplace Pension Duties
If you employ at least one person, you are an employer and have certain legal duties. Under the Pensions Act 2008, every employer in the UK must put certain staff into a workplace pension scheme and pay into this, this is called 'automatic enrolment' and is an employer’s legal duty.
Starting Automatic Enrolment For The First Time
Your legal duties begin on the day your first member of staff starts work which is known as your duties start date. Your first task should be choosing a pension scheme set up for automatic enrolment, you should do this as soon as possible because the set up can take some time.
Even if you think you won't need to put your staff into a scheme, you still have duties, including completing an online declaration of compliance to advise The Pension Regulator what you've done for automatic enrolment.
Your First Member Of Staff’s First Working day ‘Duties Start Date’
It is recommended that you assess your staff prior to them starting to ensure you are ready for your responsibilities once they have started. Once you have employed your first member of staff, you have to check if they should be enrolled in to a workplace pension.
Assessing Your Staff
Your staff will fall in to one of two categories:
1) Staff who must be put in to a pension scheme
2) Staff who don’t need to be put in a pension scheme
Assessing your staff depends on their earnings and age, this table shows the categories and should be noted that these figures tend to change annually, at the Chancellor’s budget in March.
** Has a right to join a pension scheme = if they ask to join a pension scheme, the employer must provide a pension scheme for them, but the employer doesn’t have to pay contributions into a pension scheme.
*** Has a right to opt in = If they ask to be put into a pension scheme, the employer must put them in a pension scheme that can be used for automatic enrolment and pay regular contributions.
**** Must be enrolled
The employer must put these members of staff into a pension scheme that can be used for automatic enrolment and pay regular contributions. The employer doesn't need to ask their permission. If a member of staff gives notice, or the employer gives them notice, to leave employment before the employer has completed this process, the employer has a choice whether to enrol them or not. The employer also has a choice
*Valid February 2023.
You can delay assessing your staff for up to three months, it doesn’t change the duties start date just the day you assess their age and earnings. You must write to staff to advise them you are using the postponement.
You may decide to postpone if you have seasonal or temporary staff who may stop working or you within three months, to be in line with a probationary period or to give you more time to set up the pension scheme.
Writing To your Staff
Once staff have been assessed to work out who to put into a pension scheme they must be given information which explains how automatic enrolment applies to them within six weeks of the start of your legal duties.
There are different letters for staff being put in to a pension scheme, staff that don’t have to be put in a pension scheme and for staff being postponed. Click here for letter templates.
Each time you pay your staff (including new starters), you must monitor their age and earnings to see if they need to be put into a pension scheme and how much you need to pay in.
Every three years you must carry out re-enrolment to put back in any staff who have left your scheme. You’ll need to put staff back into your pension scheme if they have left it, and if they meet the criteria to be put into a pension scheme. This is known as re-enrolment. You will also need to continue paying into your pension scheme, manage requests to join or leave the scheme and keep records. Re-enrolment includes submitting a ‘re-declaration of compliance’ to The Pension regulator through their portal, it’s an online form for you to tell them how you have met your legal duties.
Even if someone else (such as a bookkeeper) has helped you with your duties, and may even be completing the re-declaration for you, it is your legal duty as the employer to make sure that the re-declaration is completed on time and the information entered is correct. If not, you may be subject to fines.
If you are going to be undertaking the workplace pension administration yourself, it is important to create an account on The Pension regulator’s portal where you will complete your declaration of compliance, monitor dates and also change contact details.
The most recent data that The Pension regulator has published, in just under 6 months there were over 250 fines with the biggest fine being £52,500.
Wilfully failing to put eligible staff into a pension scheme and knowingly providing false information in a declaration of compliance are criminal offences. The maximum punishment is two years in prison.
It's against the law to try and persuade staff to opt out of (or leave) a pension scheme. If you don’t have anyone to enrol, you'll still have other duties. If you comply late, you will be expected to pay back any missed contributions to put staff in the position they would have been in if you had complied on time; this would include backdating contributions to the day that your staff member first met the age and earnings criteria to be put into a scheme.
How Cashtrak Can Help
We provide pension services as part of our payroll service or standalone. Our payroll software system automatically assesses and manages your staff on an ongoing basis and sends the relevant communication to them. We can help with choosing the right workplace pension scheme for you and managing your ongoing duties. Contact us here.