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Accountex Seminar |Auto Enrolment: A new Revenue Stream for Bureaus

6th May 2015
Brought to you by
BrightPay logo

The payroll solution that provides all you need for Auto Enrolment.

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Have you found this content useful? Use the button above to save it to your profile.

Paul Byrne, Managing Director at BrightPay will present this free seminar for accountants who have payroll clients. Paul is a chartered accountant with over 20 years’ experience in practice, most of those years as a sole practitioner or partner. He managed about 30 payroll bureau clients, some of whom were a nuisance but he needed to look after them to hold on to other more profitable areas of their business. A handful of my payroll clients were very profitable and definitely worthwhile.

What is auto enrolment?

Auto enrolment or AE is the biggest challenge for payroll since RTI and arguably an even bigger challenge than RTI. AE is a huge subject; the software developers guide alone spans 285 pages. The various detailed employer guides would easily exceed 1,000 pages. The good news is that you don’t have to be experts in AE. It is up to the payroll software providers and the pension providers to filter out all the noise for you.

What AE actually means for an employer is that, from their staging date (or from their deferred date if they are using postponement), all eligible jobholders must be automatically enrolled into a pension scheme and the employer must also contribute.

Eligible jobholders are those who

  • are between the age of 22 and state pension age

  • earn more than £10,000 per year

  • work or ordinarily work in the UK

Eligible jobholders can opt out after being enrolled. All other employees are either non eligible jobholders or entitled workers and they can choose to join the workplace pension scheme. Although, in the case of entitled workers the employer is not obliged to contribute. In summary, AE is something that is optional for the employee but mandatory for the employer.

The minimum employee deductions and employer contributions are 1% and 1% increasing to 3% employee and 2% employer on 1st October 2017 and 5% employee and 3% employer on 1st October 2018. The percentages are calculated on qualifying earnings which is earnings between £5,824 and £42,385 per annum.

The roll out - 1st June date and 1st January date

AE is being rolled out in stages across all employers, and started with the larger employers in October 2012. By October 2018 all employers will be required to offer workplace pension schemes to eligible workers. At present there are over 1.2 million employers still to stage.

The 1st June this year is an important date as small and micro employers are being included in the mix, although not in great numbers. However, 1st January 2016 is the start of the so called tsunami or capacity crunch when 110,000 small and micros will stage in that month alone. Small employers are those with less than 50 employees while micro are less than 5.

The Pensions Regulator’s research suggests that 78% of small businesses will look to their bookkeeper, accountant, or payroll bureau provider for advice. And a lot of these will approach you after or close to their staging date. This makes sense as most of the employers who have already staged will have had their own in house HR or Payroll resources to help them. Not so with the small and micros, they will depend on you their accountant.

The business opportunity

So, you are going to have clients looking to you for help with AE. Some of you may feel that AE is just another imposition, a bit like iXbrl, RTI or FRS102. Nothing good can come of it and it will require a large investment in time and systems from you. My message to you is that AE is different. It should require little or no investment in systems and very little time on training.

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Many accountants are choosing to charge their payroll clients based on a tiered system. This pricing system allows the employer to understand and decide what level of AE service they require from their accountant. It also allows the employer to decide how much of the AE process they want to do themselves. The prices that accountants and bureaus are charging vary dramatically across the market. It is very much dependant on the number of employees the employer has and the level of AE services the employer wishes to be carried out. The tiered system would work as follows:

Tier 1

  • AE Set up

    • Employee Assessment

    • Enrolling Employees

    • AE Communications


Tier 2

  • AE Set up

    • As above plus

    • Process opt ins& opt outs

    • Postponement

 

Tier 3

  • As above plus

  • Declaration of Compliance

 

Tier 4

  • As above plus

  • Ongoing AE Duties

 

This pricing tier system firmly puts the decision into the hands of the employer. A common theme is emerging from payroll clients that they don’t want to pay for AE. By segmenting the various AE duties the employer can then begin to understand how much is actually involved in processing and complying with AE.

Another approach that has been discussed amongst accountants is to offer a free AE consultation with clients. This consultation allows you to explain the various administrative aspects of AE to your existing clients and potentially gain new clients. The consultation approach will hopefully eliminate your clients seeking AE advice from you for free. Typically a consultation will last for a half an hour. It is also useful to produce a PDF for your client explaining each of the AE duties. This information and a number of guides are available on The Pensions Regulator's website.

What advice are you allowed give?

Auto enrolment advice is not a regulated activity, and firms are able to help their clients, the employers, with scheme selection. If you, as a firm are very comfortable and have experience dealing with one particular pension scheme provider, it is OK to suggest to your client that he or she goes with this provider. Advice to individual employees on the other hand is regulated.

On a practical level, what do you do ... staging, on-going monitoring, etc.

Employers (or you on their behalf) must set up a Pension Scheme with a qualifying pension provider and I know that John from NEST will be able to give you some tips in this regard. Next, employers must assess their workforce at their Staging date (or their deferred date) and enrol all eligible jobholders.

Employers must also pass on the necessary communications to all employees, not just those who are automatically enrolled. 5 months after the staging date, employers must complete a Declaration of Compliance to notify the Pensions Regulator that they have complied with AE.

There are also a number of on-going employer responsibilities such as handling opt outs (and opt ins), making deductions and contributions, monitoring employees each pay period, and sending a contribution file to the pension provider.

The on-going monitoring mainly means seeing if anyone’s earnings or age now places them in the category of eligible jobholder or if new employees are eligible jobholders and therefore need to be enrolled (or postponed).

Your payroll software should help you with all of the above practical tasks.

Important note: If you or a client wants to use postponement at your staging date, make sure you issue the necessary communications to the employees within 6 weeks of the staging date, otherwise the postponement will be null and void and AE will need to be backdated to the original staging date.

Conclusion - have the right tools in place, check staging dates

You can check your clients’ staging dates on The Pensions Regulator’s website by simply keying in your clients’ PAYE reference. You can then be proactive by approaching your clients who are due to stage and offering to handle everything for them.

Finally, the plug had to come sooner or later! BrightPay payroll software will handle all the required AE admin tasks for you and it only costs £199 plus VAT per annum. It handles an unlimited number of clients, each with an unlimited number of employees. Support is included in this price. You can download it from BrightPay.co.uk and avail of a 60 day free trial.

Seminar Objective

What Paul hopes to achieve is to give you some insight on what you need to be doing or planning over the coming months. He will give you a brief summary of the agendas bullet points, while our fellow director Ross Webster will show you how auto enrolment can be dealt with practically using payroll software and John Hale from NEST will give you an introduction to NEST Connect.

Don’t forget to drop by the BrightPay stand at Accountex. With less than a week to go, free tickets are still available.  Visit us at stand number A630 to avail of the latest offers for new customers.

Free Accountex Tickets – Register Here

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