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How to get your small business off the ground: auto enrolment
In this article we deal with the issue of pensions auto enrolment
Question: I’m a small business owner, and am worried about my auto enrolment obligations. What do I need to do?
Answer: Auto enrolment requirements are coming into force for around 800,000 small businesses during 2017. If you employ just one person aged between 22 and the state pension age, who is earning more than £10,000 a year, then you are likely to have duties under pension law to put them into a workplace pension scheme, and to make regular contributions.
The Pensions Regulator is responsible for enforcing the law on workplace pensions, and so your first requirement will be to check its online duties checker to find out if auto enrolment applies to your business, and from when. You will need your PAYE reference number for this, and if you find auto enrolment doesn’t apply you will need to fill out an online form to this effect.
If it does apply to you and your current/future employees you will be given a staging date, by which point you must have a workplace pension in place. You will also need at this point to communicate with your employees about how auto enrolment affects them.
When choosing a workplace pension scheme consider:
• What is the cost to my business?
• Is the scheme compatible with our current payroll software?
• Is it suitable for our current and future staff?
• Will it carry out the administrative functions I require?
There are statutory minimum contributions that you, and the employee, will need to make. Currently, as an employer you will need to contribute at least 1% of the employee’s salary into a pension, with a combination of employer and employee needing to contribute at least 2%. Be mindful that these contributions are set to be raised to 2% and 5% respectively from 1 October 2017.
Employee’s workplace pension contributions are deducted from their gross pay, prior to income tax deductions. They must be supplied with a paper or electronic copy of their record of pay for each pay period, demonstrating how any pension contributions have affected their net pay.
• Darren Nicholls is Product Manager for Informi, powered by AAT. Visit informi.co.uk/ to find more practical advice
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