Auto Enrolment for Employers

Auto Enrolment requires employers to enrol eligible workers into a workplace pension scheme. Every employer is affected even if you only employ 1 person. The new regulations will be enforced by the Pensions Regulator.

When the UK government found too few workers were putting money into a pension, they introduced a new law – called automatic enrolment or ‘auto enrolment’ – to help fix the problem.

This means every employer must automatically enrol workers into a workplace pension scheme if they are aged between 22 and the state pension age, earn more than £10,000 a year and work in the UK. This automatic enrolment is automatic from the employee perspective only – as an employer there are things which you need to do.

When is your Deadline/Staging Date?

Employers have been given various staging dates. These are dates on which they must start enrolling employees into workplace pension schemes. Staging started in 2012 and will continue until 2018 by which time companies of all sizes must be compliant.

You can find out your exact staging date on the Pensions Regulator Website.

You simply need to enter your PAYE reference number.

The PAYE Reference can be found on letters you have received from The Pensions Regulator about automatic enrolment. Alternatively, it can be found on the letter HMRC sent you when you first registered as an employer, or from your payroll software package.

  1. DUTY TO ASSESS YOUR EMPLOYEES

As an employer, you must auto enrol your qualifying employees into a qualifying pension scheme. They can choose to voluntarily opt out of the scheme, however, this should not be due to any persuasion from you as their employer.

An employee’s eligibility is based on an employee’s age and earnings.

Automatic Enrolment applies to:  

Those aged between 22 and 66 years

who earn at least £192 per week or £833 per month gross

Those younger than 22 or older than 66 have a right to opt-in to an eligible pension scheme but it is not automatic. Anyone earning less than £192 per week or £833 per month gross, cannot be enrolled in the scheme.

This table summarise Employee Eligibility

DO YOUR EMPLOYEES QUALIFY FOR AUTO ENROLMENT
AUTOMATIC ENROLLMENT MANUAL ENROLLMENT NOT ELIGIBLE
SALARY: > £10000 gross per year SALARY: > £10000 gross per year SALARY <£10000 gross per year
AGE: 22 to 66 AGE: <22 years

AGE: >66 years

  1. YOUR DUTY TO ENROL QUALIFYING STAFF

You need to automatically enrol eligible jobholders into a qualifying pension scheme, and

make employer contributions on their behalf into that pension scheme.

Find a scheme here

  1. YOUR DUTY TO KEEP RECORDS

You must keep records to show that you have complied with Auto Enrolment. The law requires employers to retain documents relating to auto-enrolment for a period no less than six years.

  1. YOUR DUTY TO LET YOUR EMPLOYEES KNOW

You are required to write to each of your employees after your staging date to inform them of the changes:

  • their auto enrolment rights
  • how automatic enrolment applies to them
  • what you’ve done for them
  • why you’ve done it
  • the details of the pension scheme you’ve chosen for them
  • what contributions will be deducted from their pay
  • that they have a right to opt out of your pension scheme if they wish to.
  1. YOUR DUTY TO MAKE A DECLARATION OF COMPLIANCE

You need to let the Pensions Regulator know that you have complete your the enrolment process.

You can do this by visiting the following link.

You will need your government gateway ID and employer reference number, PAYE scheme reference(s) for all PAYE schemes the employer use, details of the Pension Scheme you have chosen and more.

 

Writing an Employment Contract

What to include in a contract:

A contract would need set out the terms you require and would need to be offered to and accepted by your employee. This is a simple example of terms that would be expected to be included in an Employment Contract.

  • your businesses name and address
  • the name of the employee
  • the date their employment begins
  • Details of the contract length (permanent or fixed term)
  • how much and when the employee will be paid e.g. weekly or monthly
  • hours of work
  • holidays and holiday pay, annual leave entitlements
  • job title and job description
  • Terms and conditions of Employment Contracts
  • Details of the Company’s discipline and grievance procedures

Learn more about contracts and how to make one on the ACAS website: http://www.acas.org.uk/index.aspx?articleid=1461

 

Other Points which may or may not be applicable to you include:

  • Sick leave and sick pay
  • Details of any probationary period – (a probationary period can be a good idea)
  • Information on overtime, time off in lieu or flexible working arrangements
  • Confidentiality and data protection
  • Expenses
  • Maternity, Paternity, Parental, Shared Parental & Adoption leave  Notice requirement

 


 

While a Contract of Employment is not a legal requirement in most cases, it could prove to be advantageous. Having a contract will protect you and your business in a number of ways, most notably because the employee will be bound by the terms of the contract.

If the work the employee engages in involves dealing with confidential information about your business, your products or your clients, a contract gives you the platform to specify clauses in the contract which prevent the employee from divulging this confidential information even after their employment contract has ended.

A contract can set out the length of the contract and the period of notice (ie, time before leaving the position). Having an employee agree to these conditions in a contract can give you greater control over their ability to leave their position and your ability to terminate their contract. For example, setting an initial contract 90 days term will give you the option to extend or terminate this contract without difficulty after the 90 day period, depending on the performance of the employee. It will also protect your business from employees leaving without giving appropriate notice.

Other clauses that can set out include, start and ending of a working day, expected appearance, expected performance level. These all allow you to terminate employment if any of the clauses are not met.

Today, most employees would prefer to have a Contract of Employment in place before commencing employment. An Employment Contract is also seen as a certain security in their position and helps attract talent.

Download Sample UK Contract

Download this employment contract to get an idea of the issues you will be required to address when you are producing your own employment contracts.

Employee Verification Checks

There are a variety of Employee Verifications you may need to do, or in some cases you may not need any. However, it is recommended that at the very least Work References be requested.

The verifications you choose to do will depend largely on the industry you operate in and your attitude toward the risk of hiring a new employee.

For example, working with children or the elderly will require a mandatory CRB check. You can learn more about CRB checks and get started on it here>

Checking whether your employee has the legal right to work in the UK is your responsibility  and the consequences of not being vigilant about this could lead to fines of up to £10000 or worse. For more guidance on how to assess if someone has the right to work in the UK, head on over to the following website: https://www.gov.uk/legal-right-work-uk.

Common types of employee verifications

  • Medical History
  • Employment Verification
  • Education Verification
  • Professional Licensing Verification
  • Personal References
  • Drug Screening
  • Driving Record
  • National Sex Offender Registry
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