- May 12, 2015
- Posted by: STERLING FINANCE
- Category: HMRC
Will small business encounter issues with the looming compulsory auto enrollment for pensions? What this means to small business? The auto enrollment is still an unknown area for many small enterprises, but it is now, quickly becoming a topic to discuss by many. The auto enrollment and impact on small business is still not clear and is scheduled to be completed by June 2017 with well over 600,000 businesses to enter the scheme. Currently there are many seminars and conferences on the subject being organised as employers, accountants and payroll companies must prepare themselves for it.
1. You will receive a letter giving you the time when your business will need to enter the scheme (your staging date).
2. Start preparation at least 12 months prior commencement of your duties within the scheme. Your most important task will be to choose the pension company you will be working with under the scheme. Now that not all Pension scheme underwriters will take on a business, as most pension providers are choosy. Therefore it is important to check which companies provide the right service for your company. NOW Pensions is one of only two pension companies that deal with all types of business. Check with your Accountant, HR Consultant or your Financial Consultant.,
3. Plan your finances before 30.09.2017 your contribution in to the scheme as an employer will be 1% on top of 1% contributed by staff. From 1st October 2017, employers contribution will be 2% in addition to 3% contributed by the staff. And from 1st October 2018 employers contribution will rise to 3% in addition to 5% contributed by staff. These costings are in addition to what employers already pay under the PAYE scheme. Therefore it is vital to plan early as this is an additional compulsory work that your business will be obliged to deal with. In addition to this, you need to also plan for any additional costs such as setting up costs, extra costs for subcontractors work, ie: payroll , or accountant.
4. Check that your payroll accounting software is updated for the purpose of dealing with the additional scheme. If you run your own payroll system will need to be upgraded, and if you use outside payroll provider, then you need to double check that they have the system to provide the correct service to you. The pay roll system must be able to run the auto enrollment system.
5. About six months before start of the auto enrollment, it is important to check the records and payroll process. That means that staff records need to be checked including the dates of birth, National Insurance number, salaries as well as contact details. It is the employers responsibility to have all staff records up to date and keep records of contributions to the pension scheme. This will help employers to send information to the chosen pension provider on regular basis.
6. Once the pay roll system is set up and readu for auto enrollment, the employer should look for a pension provider. If one is already chosen, check that they are ready to take on everyone. (Some pension providers are not taking on small business). The Government has set up a pension scheme called the National Employment Savings Trust (NEST) that all employers can use for automatic enrolment. The other scheme is done by NOW Pensions. It is important that the scheme you choose is well run, offers good value for money for you and your staff and that it will work with the payroll process or software you’re using.
Self Employed and Limited Companies Directors
If you don’t have any staff other than directors, you may not have any automatic enrolment duties. You won’t have any duties if the only people working for you are:
1.you as the sole director, or
2.a number of directors, none of whom has an employment contract, or
3.a number of directors, only one of whom has an employment contract
Automatic enrolment will apply if more than one director has a contract of employment.
Any other information can be obtained from your Accountant, HR Consultant or Financial Advisor. You need to start now to avoid being late and not ready, as this may cost you more.