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Auto-Enrolment for Small Business: What you need to know

If you run a small business and have been contemplating whether or not to implement a workplace pension for your staff, the time for thinking is almost up. Back in 2012, a law commonly referred to as pension auto-enrolment came into effect. This new law obligated employers to put in place a qualifying workplace pension scheme which their staff would be automatically enrolled in; until recently auto-enrolment only applied to large businesses, but it’s now become a concern for SMEs and failure to comply could result in some nasty fines. We’ll get to that in a moment, but first, let’s take a look at why auto-enrolment is being broadened to include smaller businesses. We’ll start by breaking this down into some bitesize answers:


Who is affected?

All businesses who employ at least one person. There are some extremely rare exceptions which require an official application.

Why is it happening?

Pensions are a good way to save for retirement and the Government wants more people to invest in them. It is hoped that more pensions will reduce the load on the welfare system.

What does it mean?

Your business, no matter how small, will need to establish a pension scheme.

When will it happen?

The roll out has begun but the deadline is April 2017. If you haven’t started thinking about it, act now.

How will it work?

You will need to upgrade your payroll capacity and implement a pension scheme, most likely with the help of someone who understands it.

Watch out for: If you don’t comply or miss the deadline your business will face hefty daily fines.


Why is auto-enrolment happening?

Pensions are important. They enable workers to save for their retirement and support themselves when they are no longer able to work. In the past, pensions have always been optional with workers choosing to opt in or out, but from 2018 onwards all employers will have to automatically enrol their workers in a pension scheme. In short, it’s going to become an obligation for people who work to save for their retirement, and businesses of all kinds will have to support that obligation in any way they can. In an ageing population, more and more burden is being placed on the welfare system to support people after retirement, so this is the Government’s way of alleviating pressure by encouraging (or obligating) workers to save for their retirement.

Auto-enrolment is being introduced in stages leading up to 2018 when it will become law for all businesses who employ staff. The largest businesses started first, quickly followed by medium sized businesses and now small businesses are approaching their ‘staging dates’.

As a small business, what do you need to do?

When you needed to act will have depended on the number of staff your employ, but most larger businesses have already been through the process and crunch time is fast approaching for small businesses. Even if you only employ a single member of staff, you could still be fined if you miss the so-called ‘staging date’.  Fines are issued as follows:. Fines are issued as follows:

  • Between 50 – 249  employees – £2,500 per day
  • Between 5 – 49  employees – £500 per day
  • Between 1 – 4  employees – £50 per day

Currently, small businesses have until 1st April 2017 to fully comply, and it’s a good idea to get the ball rolling now if you haven’t already. Any staff that you employ in the UK who earn more than £10,000 per year and are over 22 years of age will need to be enrolled.  The process of setting up auto-enrolment for your business and staff can be quite overwhelming, particularly if you’re a start up or traditionally haven’t had to think about it before. You’ll need to be fully aware of your staging date and what bracket your business falls into, and you’ll need to get in touch with the Pensions Regulator to get the ball rolling.

You’ll need to assess your staff by their age and salary to determine who will need to be auto-enrolled, and also start planning to make contributions which will start at around 1% but may increase over time. Naturally, all staff records will also need to be fully up to date, including their dates of birth, salaries, national insurance numbers, etc. Once that’s done, you can begin looking at some of the qualifying pension schemes on offer to select one that’s most appropriate and beneficial to you and your staff.

Of course, this can all prove to be a bit of a headache. Especially if you run a local business on your own and only employ a small team. You may have an accountant or financial advisor on hand who could offer advice and perhaps help out here and there, but they’re unlikely to offer you complete solution or take all of the pain away.

What next?

Thankfully, Next Level Business are on hand to help. We’re a next generation digital accountancy firm with a strong focus on helping small businesses with their payrolls and accounts in an open, honest and practical way. We can help your business tick the box for auto-enrolment and become fully compliant, from the first step to full on implementation. For more information and a free, no-obligation consultation, contact us today.

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