Pension Auto-enrolment
What is Pension Auto-enrolment?
Auto-enrolment is a government initiative that requires employers to automatically enrol eligible 'workers' into a workplace pension scheme.
Both the employer and the employee must contribute a minimum percentage based on Government thresholds. These contributions are deducted through the payroll and paid to the pension scheme by the employer.
Employees can opt out if they choose but they will be re-enrolled every three years if they are still eligible.
What is the Definition of a Worker?
A worker is defined as any individual who:
- works under a contract of employment (an employee), or
- has a contract to perform work or services personally and is not undertaking the work as part of their own business.
If an individual is a self-employed contractor who has been contracted to perform work or services personally under a 'contract of services' they may be an assessed worker for the purposes of auto-enrolment.
Short term, seasonal, temporary staff and employees who do not have regular hours or pay will be a worker if they are paid through the payroll.
The auto-enrolment duties for each worker will depend on their category, based on their age and earnings.
What are the Different Categories of Workers?
Eligible jobholders must be automatically enrolled into a qualifying workplace pension scheme. These workers will be aged between 22 and state pension age, must earn more than the minimum earnings threshold in their pay period and must not currently be in a qualifying pension scheme.
Non-eligible jobholders can choose to opt-in to a pension scheme but do not need to be automatically enrolled. These workers will be aged either between 16 and 21 or between state pension age and 74 and must be in receipt of qualifying earnings above the earnings trigger for automatic enrolment in their pay period.
Entitled workers can choose to opt-in to a pension scheme but do not need to be automatically enrolled. If they choose to opt-in, the employer does not have to make contributions to their pension. These workers are aged between 16 and 74 and do not earn more than the minimum earnings threshold in their pay period.
What are my Duties as an Employer?
All employers with at least one worker must register online with The Pensions Regulator.
An employer must advise their workers how the rules affect them, including:
- whether they are being automatically enrolled or have the right to,
- whether they are entitled to employer contributions,
- how much they will need to contribute,
- details about the pension scheme,
- and when they will be affected.
Workers have the option to 'opt-out' of auto-enrolment within one month of being enrolled. To do this, they must complete an 'opt-out notice', which they can get from the pension scheme. A worker who has opted-out must be re-enrolled every three years if they still qualify for auto-enrolment.