It is more than 3 years ago that small businesses began to have an obligation to set up an auto enrolment pension scheme for their employees. There was a lot of information available to employers at the time through the media as well as by post so there couldn't have been anyone who wasn't aware that they had a legal duty to set up a pension scheme for their employees who were eligible to join a scheme.
In February 2016 I was invited to give evidence to the Department of Work and Pensions Select Committee who were consulting on how auto enrolment would affect small businesses. Some small employers had already reached their Staging Date so it was unlikely that anything would change at that late stage. And it didn't.
It is hard to believe we are more than 3 years on from that time and auto-enrolment assessment is a standard task when running payroll. But now it is time for re-enrolment and already many small employers have been contacted to complete their re-declaration of compliance by The Pension Regulator. There is no media coverage this time around so employers need to be aware of their legal duties and the deadline for submission.
So what does re-enrolment and re-declaration of compliance entail?
Employers will be receiving emails and letters from The Pension Regulator several months in advance of the 3 year anniversary of their original Staging Date to remind them that they have an obligation to complete a re-declaration of compliance. This applies whether you have a pension scheme or not. Some businesses may not have needed to set up a scheme if their employees have always earned below the threshold and/or are too young to join. You will need the letter code provided on the communication from The Pension Regulator in order to complete your re-declaration of compliance.
Since your Staging Date you will have had to check at every payroll that eligible employees are enrolled into your pension scheme and that the appropriate pension contributions are deducted from their gross pay. You will also have had to ensure that employees who have been postponed for the allowed 3 months have been put into the scheme after those 3 months. .
To be able to complete your re-declaration of compliance you will need to re-assess all your employees on the 3rd anniversary of your original staging date. You will need to re-enrol anyone who has previously opted out of your scheme more than 12 months ago if they meet the criteria for auto-enrolment. If you do need to re-enrol anyone you must write to them within 6 weeks of re-enrolling them, just as you did originally. Those employees, once re-enrolled, can opt out again and, as long as they do so within 1 month, they will have their contribution deduction refunded to them with their next pay.
Re-declaration of compliance will occur every 3 years from your original Staging Date and employees who have opted out will need to be re-enrolled each time. It is therefore important to budget for any additional costs which may occur because it may be that employees who opted out the first time may decide to stay in the scheme once they are re-enrolled.
There is further information about completing the re-declaration available on The Pension Regulator website.
All employers have an obligation to have an auto enrolment pension scheme if they have staff who meet the criteria to be auto-enrolled or if they choose to join. Once you have a scheme you have ongoing duties which include:
- Monitoring the ages and earnings of all your staff
- Communicating with your staff in writing within 6 weeks of enrolling them into the scheme
- Managing requests to leave or join the scheme or to vary contributions
- Keeping records of your scheme, the details of the employees in your scheme and the contributions for 6 years
- Paying the pension contributions into the scheme when they are due
- Completing re-enrolment every 3 years
There is a lot of administration involved in dealing with auto enrolment pension schemes, especially when there are a lot of employees, which is why we have always offered an administration service to our payroll clients as well as to businesses who run their own payroll. Keeping on top of the administration ensures the relevant communications are done on time, that employees are enrolled in a scheme when they reach 22 or when they reach the earnings threshold, and that new employees are enrolled as soon as their postponement period ends.
You have 5 months after the third anniversary of your Staging Date to complete your re-declaration of compliance with The Pension Regulator. As before when setting up your scheme, it is a legal duty to comply with this re-enrolment and there will be penalties for those employers who do not.