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Autoenrolment

What to do in first month of new payroll

I haven't yet advised client how to set up auto-enrolment scheme because we've only just applied for a payroll scheme, and she's not heard from HMRC yet about the scheme details. So if this is still the case when I run her first payroll, I clearly can't make any deductions. I would have had to make sure employees were informed about the scheme first, and deducting for a non existent scheme sounds fraudulent to me. 

So I can only start deductions for AE when a scheme has been set up and that can only be done when the payroll scheme numbers are known. Do you agree?

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22nd Oct 2018 12:07

Mmm - sort of.

Do you not need to apply for postponement ?

I've not dealt with one of these yet so I've not thought about it much.

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22nd Oct 2018 12:47

I thought you could just postpone without applying. That certainly used to be the case.

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to SteLacca
22nd Oct 2018 12:55

Dunno. Never done it. Pretty sure you need to tell the employees though.

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to lionofludesch
24th Oct 2018 12:08

lionofludesch wrote:

Dunno. Never done it. Pretty sure you need to tell the employees though.

Yes you do. Issue the letter as soon as possible saying you've decided to postpone but they can ask to join pension scheme now if they want to. By the time that's in place you should have the HMRC references.

Failing that, you could always calculate it and deduct on first payroll anyway, then enrol employee once you have the references.

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By tom123
22nd Oct 2018 12:49

Is it director only?

How are you going to do the payslips and RTI if you don't have the details?

On the pension front, I might consider making the deductions prior to getting the scheme set up - given that you don't pay over (or have to) until 19th of month following.

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to tom123
22nd Oct 2018 12:56

You can't do the RTI without scheme details. But you don't need to.

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to tom123
24th Oct 2018 12:25

tom123 wrote:

On the pension front, I might consider making the deductions prior to getting the scheme set up - given that you don't pay over (or have to) until 19th of month following.

Flipping heck, Nest start jumping up and down if DD hasn't been authorised to come out by the 10th. Effectively that means authorising by the 5th.

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to legerman
25th Oct 2018 09:34

legerman wrote:

Flipping heck, Nest start jumping up and down if DD hasn't been authorised to come out by the 10th. Effectively that means authorising by the 5th.

Only if the scheme was setup using the default settings, so don't use the default settings! For reasons known only to NEST, their setup defaults to payment by the 10th, which is frankly bananas.

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22nd Oct 2018 13:01

I have to say that I think you're going a bit over the top when you say it's fraudulent though. There's no intention to deceive. There are just practical difficulties.

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22nd Oct 2018 13:05

Thank you all. Of course the answer is postponement, which I'd completely overlooked.

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By Matrix
22nd Oct 2018 13:20

The employer will need to write to the employees within 6 weeks of the staging date to advise postponement but they can opt in within the 3 month period so a scheme would then be required.

I had a similar issue this morning, I don't really understand how you can get a scheme set up before pay day, so register as a new employer, get the payroll references, letter reference and set up a scheme all in the same month. Even if the employee started at the beginning of the month the practicalities of staging immediately have not been thought through properly.

In this case the business has failed so they will let the employee go at the end of month 2 but will still need a scheme (which they probably can't afford to pay to be set up).

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22nd Oct 2018 15:12

Postponement all the way for these new companies, if they have actual duties. Even if an employee then asks to join before their postponement is up, you only have to enrol them at the next opportunity, by which time you will have all the relevant details needed

NEST takes about 10 minutes to set up if you've already got an account, and barely more than that even if you don't.

Matrix, if they're less than 6 weeks old you can still send them a postponement letter, and then you'll have to do nothing - unless of course you've already made deductions.

No one enrolled means they don't need a scheme though, and you can opt not to enrol someone who is in their notice period - food for thought

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By Matrix
to HuntFord
22nd Oct 2018 15:21

They are just past the 6 weeks since the employee started 1 Sept and they only called me today about the pension (and have still not said set it up since the business is not viable and the clients have been trying to rescue it for the last month).

Even if they gave the employee notice today then they still would have to set up a scheme from 1 Sept? And even if they had postponed they would still need a scheme as they had an eligible employee on the staging date?

The only difference is that if they had postponed then no contributions would have been required for Sept and Oct.

Please let me know your thoughts.

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to Matrix
22nd Oct 2018 15:46

If you postpone you don't NEED a scheme until there is someone to put into it. As an example, NEST has no requirement or way of knowing if you have postponed someone. This is assuming that the pension company you go with doesn't do all the calculations themselves - if they do then they might want everyone's details

Saying that, if you're sure that when they reach the end of the postponement period they will need a scheme, I'd get it set up before the period ends, but no need to do it right at the start

Yeah, if they had postponed then there'd be no contributions due for either month, but you'd have needed to deduct in September already if they weren't postponed. Double contributions in October?

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By Matrix
to HuntFord
22nd Oct 2018 16:00

Yes double contributions in October, assuming they set up a scheme.

If you postpone, had an eligible employee on the original staging date and they left within the postponement period then are you saying you do not need to set up a scheme?

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to Matrix
22nd Oct 2018 16:13

I think you've missed your chance to recover the September contributions. The employer should pay the whole 5%.

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By Matrix
to lionofludesch
22nd Oct 2018 16:41

Yes my client missed their chance (the Sept employee deduction is only about £20 gross though). I usually advise that they have to bear the whole amount if they have failed to deduct. I have advised what they need to do to become compliant now so it is with them.

Sorry to hijack the thread Moonbeam.

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to Matrix
22nd Oct 2018 16:51

Hijackers on this complex area are welcomed!

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to Matrix
22nd Oct 2018 16:14

Exactly that. Until you have to enrol someone there is no requirement for a scheme, but it's good practice to put one in place if you think you'll actually need it.

No contributions taken means no need for a scheme.

In your example, if I postpone an eligible jobholder for 3 months, I'd plan to set them up a scheme in that time. If the employee leaves before being enrolled then your provider never needs to know they existed, hence not needing a scheme. Depending on the client I might still set one up if I think they'll need it for someone else though.

I've had schemes with NEST sitting idle with no employees for a few years, where this happened

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24th Oct 2018 10:01

I've done two AE's for two employers,
In neither case was there an obligation to backdate beyond the staging date (However their employment contracts DID have an obligation to pay a pension from start of employment, so we backdated employer contributions only) admittedly neither of these were new companies
Employees get quite upset if you go and deduct multiple months in one go...

I'd suggest talk to the employees, offer to make deductions, and keep a clear audit trail of what was done, including all correspondence with pension adviser etc. and ensure the company accrues for employee and employer deductions and even better, sets funds aside.

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By Matrix
24th Oct 2018 12:00

The problem is if you set up a new payroll scheme then you stage straightaway - before you have even received a payroll ref let alone a letter ref.

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By aburt01
24th Oct 2018 11:16

Just checked and no one has mentioned the compliance declaration, or added the links for Pensions Regulator, so I'll add them here...
http://www.thepensionsregulator.gov.uk/en/employers/setting-up-a-busines...

Includes template employee letters for postponement.

Late set-up...
http://www.thepensionsregulator.gov.uk/en/employers/new-employers/pensio...

I might also mention that during the first few pay periods that an opt-out could be received that would be BACKDATED to the beginning of an auto-enrolment (time limited opportunity), you may be, I have seen employers who are, permitted to withhold/not pay over to the pension fund monies deducted, so that they can be restored to the employee next payslip, or paid over should the BACKDATED opt-out not be received in the time-frame specified in legislation.

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By Matrix
to aburt01
24th Oct 2018 12:18

Yes we have all being doing these for a few years now. The problem is as in the original post, that the employer stages as soon as they become an employer which is impractical.

In my experience no one ever opts out.

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24th Oct 2018 13:10

EDIT: Just seen I was a bit late to the party, and Moonbeam has already seen the sense in postponing, so I've deleted my comments, as it was just a repeat of other advice that I hadn't read at the time.

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