What is it?
Auto-enrolment is a works place pension system being introduced across all employers. Deductions are made from employees’ pay packets, employers make a contribution and the government gives tax relief that also increases the pension value.
Is it mandatory?
Unless you already offer a scheme then it is. Employees can opt out of the pension however it is an employer responsibility to provide the scheme after the deadline, which depends on the size of employer (see below)
Which employees will be registered?
All employees who earn more than £8,105 will be auto-enrolled. Part time employees can also enrol and if they earn more than £5,564 the employer will be obliged to make a contribution.
When do I need to register?
The pensions regulator will write to employers giving them at least 12 months notice. The expected dates are – 250 + employees – should already be registered 50 – 249 employees – April 2014 – April 2015 30 – 49 employees – August 2015 – October 2015 1 – 29 employees – Jan 2017 – April 2017
How much will it cost?
Employee deductions will start at 0.8% of earnings and employers at 1%. This will rise to 4% for the employee and 3% from the employer & 1% in tax relief from the government.
So a £20,000 salary will cost an employer £12.03 per month when auto-enrolment is first introduced rising to £36.09 per month when it is in full force, adding £433 per annum to the cost of employment in this case.