If you are one of the 500,000 plus people in the UK who started a new business in the last year, pensions are probably not uppermost in your mind.
Nevertheless, if you are employing anyone apart from yourself, it’s a mistake to ignore them as you could face fines of up to £500 a day (or sometimes more for larger businesses) if you ignore the requirement to complete documents that are sent to you or to adhere to deadlines.
Start-ups have specific issues
Tech start-ups are affected by the auto-enrolment requirements like other new companies but they also have some additional issues to consider. One such issue is that a startup’s workforce is often a combination of permanent employees, temporary employees, and . This means there is an extra degree of complexity involved in setting up a workplace pension scheme. It’s therefore important from the outset to be aware of who does and doesn’t need to be included in an scheme and from when.
Wait a minute. What is this about?
Workplace pensions and auto-enrolment were introduced in 2012, and you are now legally responsible for helping your employees save for their retirement. The key actions to ensuring that you do not fall foul of the new legislation are to:
- be aware of what your obligations are
- respond promptly to any communications that you receive from The Pensions Regulator and other Government departments, and
- ensure you act in good time to meet the various deadlines that apply.
It’s not just about full-time employees
The starting point is to check whether your employees are classified as ‘workers’ and you need to understand your contractual relationships with them. Don’t be fooled into thinking that only full-time employees are classed as workers.
A worker is defined as any individual who works under a contract of employment (an employee), or has a contract to perform work (or services) personally and is not undertaking the work as part of their own business.
“Laws around freelancers and the gig economy are changing”
If you have entered into a contract of this type with an individual you are an employer and required to comply with the new employer duties. This may include any agency workers you hire. Broadly, agency workers are individuals who are not undertaking the work as part of their own business. Typically, that will be people that you take on via an employment agency.
Freelancers are a different matter, and this is where it gets more complex. Laws around freelancers and the gig economy are changing, and the onus is on you to keep up to date with your obligations. If you use freelancers, do your research – starting with The Pensions Regulator’s information – and get specialist advice if you need it.
So, who is included?
There will be some employees who meet certain age and income requirements who must be auto-enrolled into your pension scheme. The employees that must be auto-enrolled into your new pension scheme are those who:
- are aged between 22 and State Pension age,
- earn over £10,000 a year, and;
- work in the UK.
Note that some employees called ‘entitled workers’ don’t need to be automatically enrolled. They can ask to join your pension scheme, but you don’t need to pay money into their pension pots unless you’d like to.
An entitled worker is someone who is aged between 16 and 74 and has earnings less than the lower earnings threshold (currently £5,824 a year/£486 a month/£112 a week for the 2016/17 tax year).
The next aspect to get to grips with is when you are required to set up your scheme, called the staging date. Use this helpful guide from The Pensions Regulator to help you find your staging date.
There are a few different things that affect your staging date. For example, if you have already started to pay your employees under PAYE and have been doing so since say, 1st October 2016 then you will need to set up your scheme and auto-enrol eligible employees from 1 January 2018.
Putting your pension scheme together
Once you’ve established which workers are eligible and also your staging date you will you will then need to take the following steps:
- Set up a workplace pension scheme.
- Communicate these new pension rules with your employees in a written letter.
- Automatically enrol all of your eligible workers.
- Register your business with The Pensions Regulator and maintain a record of this.
- Contribute to your employees’ pensions on a regular basis and facilitate any opt-out requests and arrange refunds.
- Maintain up-to-date and accurate records.
- Review your employees including any new starters regularly.
- Complete your declaration of compliance with The Pensions Regulator.
Beware of fines
You should also be aware that if you don’t set up a workplace pension scheme for your employees within the stipulated timelines, then you could face significant fines and penalties. Fines also apply if you fail to complete your ongoing auto-enrolment duties.
How to get help
So, if this all appears daunting, you can obtain help in a number of ways.
One is to seek assistance from an employee benefits adviser, and you should make a point of finding out about the costs in advance, both initial and ongoing fees.
Another route that may suit your new business, and which will help you motivate and retain your employees, is to look for assistance that combines HR support and benefits on an integrated basis.
This is where bob comes in. bob is the central hub at the heart of your HR world. All your people data is in one place that’s simple and easy to use. Employees even do most of the data entry themselves and there are integrated auto-enrolment and employee benefits that are straightforward to add.
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From Roderic Rennison
Roderic Rennison is an advisory board member at hibob. He is a Chartered Director with over 40 years financial services experience in a wide spectrum of roles including sales, product development, product procurement, provider management, strategy, corporate activity – acquisitions and integration, regulation, regulatory change and risk. When not helping great companies to become even better, he writes for his own blog