Workplace Pension Re-enrolment can be quite confusing to many business owners, and we regularly receive questions from our clients around the process management of related compliancy.
Therefore, we’ve put together this article to answer some of those questions and straighten out what the process is, and why it exists, including an example of a common re-enrolment scenario.
First things first; in 2017 the Pensions Regulator made the workplace pension scheme compulsory for all companies that employed staff. The Pensions Regulator set a ‘staging date’, also known as a ‘duties start date’, which was a deadline for all companies to ensure their employees were enrolled onto a workplace pension scheme. The staging date was dependant on the size of the company’s payroll. Failure to meet the deadline resulted in a fine.
For companies who took on their first employees since the setup of the scheme, there is no ‘staging date’ but a ‘duty start date’ instead. The date of which is determined by the date you hire your first employee and enrolment them onto a workplace pension scheme.
From this moment on, you will need to complete re-enrolment and re-declaration, every three years.
This three-year re-enrolment is a compulsory requirement of the Pensions Regulator workplace pension scheme.
Pension re-enrolment applies to all employers unless they have received an exemption.
Exemptions usually apply to sole Directors. If a director does not have an employment contract, they cannot be a worker and are therefore always exempt from automatic enrolment.
This means that an organisation with one or more directors who do not have contracts of employment is not an employer and should apply for exemption. This application means they will not need to do anything with the pensions regulator unless their circumstances change, for example, if they take on non-director employees. If this happens, they’ll need to reapply by contacting the Pensions Regulator.
It’s important to understand that those companies mentioned above do not automatically have exemption in place, unless it was applied for at the time of staging (when auto-enrolment came in for that business) or since then.
If you are unsure about director exemptions from automatic enrolment, visit The Pensions Regulator - Director Exemptions from Automatic Enrolment.
All Employers Who Are Not Exempt
As mentioned in the introduction, all companies who employ staff will need to setup a workplace pension scheme and ensure all eligible employees are enrolled onto it.
Employers must then complete the declaration of compliance to inform the Pensions Regulator they have met their duties.
When the declaration of compliance is completed every three years, it is compulsory to reenrol any eligible employees, even those who have previously opted out.
- Your accountant identifies that you have approached your three-year term for pension autoenrollment and reenrols all your employees who qualify for the workplace pension scheme.
- Some of your staff who have previously opted out of the pension question why they have been re-enrolled with you.
- You bring this up with your accountant as those who previously opted out have been put back in.
- Your accountant confirms they have an obligation to do this on your behalf as a legal requirement of auto enrolment. The staff will need to re-optout if they don’t want to make payments, this will be a reoccurring event every three years.
- Your accountant also mentions as with the initial enrolment, anyone who wishes to opt out has one month to do this to get the contribution refunded.
In Summary: If you’re armed with this understanding of the process as an employer, you can then, should you wish; bypass the need to contact your accountant, immediately inform your staff that this is standard practice and if they wish to opt out - point them in the right direction, saving precious time when it comes to any who would like their contribution refunded.
It’s important to know that if the request to opt out fails to meet the one-month submission deadline, the contribution will not be refunded and will be tied to the pension contract terms.
Most of the time, the request to opt out will need to be made directly to the pension provider, however, if you are unsure, contact your accountant to confirm.
Re-enrolment Compliance Checks
Even if an employee does choose to opt-out, as an employer, you will have ongoing compliance requirements to complete either re-enrolment or re-declaration.
Every three years, you must put qualifying members of staff back into an auto-enrolment pension scheme. Only employees who have opted out will need to be considered. If you have any employees aged between 22 and the state pension age, who earn over £10,000 a year (or £833 a month, or £192 per week), they must be placed back into a workplace pension scheme.
Once you have added any employees back onto a workplace pensions scheme, you will then need to inform them so in writing. This must be completed within 6 weeks after your re-enrolment date. It is best to take this opportunity to explain to these employees that it is a legal obligation for you to add them back on, but they have the right to opt-out again if they wish.
Your legal duties around pension re-enrolment will vary depending on whether you identify that you have staff to re-enrol, or whether you have no staff to re-enrol. Either way, you will need to complete are-declaration of compliance to inform the Pensions Regulator that you have met your automatic re-enrolment duties.
Monthly Workplace Pension Checks
It’s imperative to ensure you are keeping on top of all your pension obligations as an employer. Therefore, each time you run your payroll you should carry out the following ongoing checks:
- Monitor the age and earnings of your employees. Once they are eligible to be placed onto a workplace pension, you will need to do so automatically. If they opt-out, then you will not need to review this until your next re-enrolment date.
- Pay the correct amount in employer’s pension contributions to their fund for any employees who choose to remain in the workplace pension scheme.
If you need payroll support for your business, please get in touch with Blue Rocket Accounting today on 01322 555442 to find out more about our payroll service.
You can also get the full rundown on your workplace pension responsibilities as an employer, check out our blog, Workplace Pensions. What are my duties as an employer?