Auto-enrolment changes – employers get ready!

Auto-enrolment changes – employers get ready!

By law, on 6 April 2018, employers are required to increase the amount of their minimum contributions into their staff’s automatic enrolment pension to at least 2% of qualifying earnings.

What do employers need to be aware of?

Make sure employees are aware

Staff should know what is happening. When a member of staff was first automatically enrolled, the letter they received from the employer will have set out that contribution levels will increase over time.

There are no additional duties under automatic enrolment for employers to advise staff about the increases, but most employers will find this useful in order to help their employees and minimise queries or misunderstandings. For instance:

  • employees may have forgotten about the increases and may not be able to afford the increase
  • workers might think there is no other option but to leave the scheme if the increases cause them hardship.

Check your calculations

An obvious point to mention is to check your payroll systems.  Check with your payroll provider to make sure that they’re ready to calculate and deduct the increased contributions when they rise from 6 April 2018 and 6 April 2019 – if they’re not prepared for the increases, the right amount may not be paid across to the scheme on time.

It’s very important that the workplace pension schemes and payroll software can support the contribution increases, otherwise, the right contributions might not be deducted at the right time, and the schemes used may no longer be qualifying schemes for automatic enrolment.

 Check the terms of the scheme

Remember that the employer can choose to pay the full amount of the total minimum contribution. This may mean staff do not have to pay in at all, unless the scheme’s rules say that they have to make contributions.  The employer and their staff can choose to pay more than the minimum contributions if they wish.

What are the minimum contributions?

The table below shows the minimum contributions that employers who set up a defined contribution scheme for automatic enrolment must pay, and the date when they must increase. This is calculated based on qualifying earnings.

Date Effective Minimum Employer Contribution Employee Contribution Total Minimum Contribution
Present – 5th April 2018 1% 1% 2%
6th April 2018 – 5th April 2019 2% 3% 5%
6th April 2019 onwards 3% 5% 8%

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