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Automatic Enrolment for Dummies - Part Three

27th Jan 2015
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The payroll solution that provides all you need for Auto Enrolment.

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This blog is a three part series from BrightPay, read part one here and part two here.

Choosing a pension scheme provider can be daunting for the employer with so many providers competing for their business and all claiming to be the best for their particular needs. NEST is a scheme which is government funded and which must accept all employers and employees no matter how unprofitable the business is for them. These are facts that you can convey to your clients without it being investment advice! In my opinion, the way it will play out for SMEs is that NEST will be the default option unless another provider can convince the employer to go with them. NOW:Pensions and The People’s Pension are Auto Enrolment providers who have managed to capture significant market share to date.

At present, all of the pension providers have different file specifications for their csv files. In addition, they all seem to have different requirements when it comes to employee communications. NEST prefers the employer to look after all statutory notices. The People’s Pension prefers to handle statutory notices for enrolled employees and for the employer to handle the rest. NOW:Pensions can look after either all statutory notices or enrolled employees only.

“PAPDIS is a new file specification that will work for all pension providers. This was spearheaded by “Friends of AE” and is still in its infancy. NEST will not be able to accept PAPDIS files for a number of years.

The Pensions Regulator is currently proposing new rules aimed at relaxing the AE burden but these appear to be mainly technical in nature.

And that is pretty much it. As I stated above, this is an overview and should give you a fundamental understanding of Auto Enrolment. To go into more detail would involve writing a book!

No doubt you have many questions and concerns. In particular you are probably wondering how exactly this will all work for you in practice when it comes to one of your clients staging.

Let me summarise a case study from one of our BrightPay payroll software customers.

Accepted wisdom is that you mobilise at least 6 months before staging. In this case study the customer left things to pretty much the last minute. He knew that he could postpone if it all went pear shaped!

Staging date was 1st June 2014. Payroll was a monthly payroll. There were 11 employees.

Towards the end of June, the customer registered with NEST as an employer. This was done online and took about 30 minutes. The customer went with the bare minimum and did not concern himself with setting up different “groups” of employees. This is something you would do if you wanted to use different contribution levels for different groups of employees.

The staging date had already been plugged into BrightPay software so when he ran his June payroll the software identified that 10 employees were eligible jobholders who needed to be enrolled and 1 employee (who was 20 years of age) was a non-eligible jobholder who had a right to opt in.

He followed the instructions on screen and printed off the letters produced by the software which he gave out to the employees.

The payroll made all the relevant deductions and contributions and produced the files for sending to NEST through their online upload. In NEST’s case there was one file detailing the employees who were being enrolled and another file detailing the contributions. These were both uploaded successfully to NEST.

The customer estimated that an additional hour was spent doing the payroll as a result of AE and staging.

In the following month, one of the enrolled employees opted out. BrightPay was informed of this and in July’s payroll run, a refund was given to the employee. There were no other AE events in that month. Additional processing time was estimated at 5 minutes and that included the preparation and upload of the contribution file to NEST.

In summary, the above case study shows that it can be and should be simple. This was the customer’s first experience of AE. A typical payroll bureau should be able to handle staging for their clients much more quickly and efficiently.

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Paul Byrne FCA
www.brightpay.co.uk

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