If you’re new to employing staff, you might be wondering if you’re required to set up a workplace pension. The chances are, the answer is yes – but a few rules apply.
Since 2012, pension auto-enrolment has been a legal requirement in the UK. It means every employer must put certain workers into a defined-contribution workplace pension scheme and contribute towards it.
Even if none of your staff meet the conditions to be automatically enrolled, you might still need to have a workplace pension scheme if they request it.
Here’s what you need to know.
Who’s included in auto-enrolment?
As we mentioned, every employer in the UK has obligations under auto-enrolment.
You may or may not be required to set up and contribute to a pension scheme, however, as this depends on the age and earnings of your staff.
The Pensions Regulator has a handy tool you can use to work out what your auto-enrolment duties are, based on information about your business and your employees.
But in short, all workers who currently earn more than £10,000 a year (£833 a month, or £192 a week) and are aged between 22 and state pension age must be automatically enrolled in a workplace pension.
You need to assess how much each member of staff earns and how old they are, each time you pay them, so you can check whether they qualify.
This is the case even if you only have one member of staff, and even if they’re working on a temporary, seasonal or variable basis.
What to do if your employees are included in auto-enrolment
If, at any point, your employees do come within the criteria for auto-enrolment, you’ll need to put them in a qualifying workplace pension scheme.
Both you and the employee must then make contributions to the pension, as a percentage of their qualifying earnings. In 2021/22, these are their earnings between £6,240 and £50,270 a year.
The total minimum contribution currently stands at 8%. As an employer, you have to pay at least 3% of that, with your employee making up the remainder. You can choose to pay more, as long as the total minimum is still met – in which case, your staff member might pay less than 5%.
If your staff don’t meet the requirements for auto-enrolment, they might still decide to join or opt in to the scheme.
You’ll have different responsibilities depending on their age and earnings, so talk to us to find out what you need to do.
Stay compliant while supporting your staff
Besides meeting your legal obligations as an employer, setting up a workplace pension is a great way to attract and retain staff, helping them to prepare financially for the future.
Workplace pension contributions also benefit from income tax relief for the employee, and qualify as a business expense for the employer, making them tax-efficient for everyone involved.
Our sister company, Systematic Auto Enrolment Services, offers a specialist workplace pensions service to handle every aspect of setting your business up with an auto-enrolment pension.
We’ll help you understand the rules and stay compliant, while saving you time with ongoing assistance.
Talk to us about setting up a workplace pension.