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Auto enrolment and data: What you need to know

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1st Mar 2016
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2016 is a critical year in the automatic enrolment (AE) programme, in particular for in-house payroll staff and accountants helping their small business clients stage for the first time.

Up to 500,000 small and medium-sized businesses will reach their staging dates this year and start the continual process of managing AE.

Much of the payroll process is related to the administration of AE, and accounting firms that currently assist clients with payroll will also be expected to deal with AE. Those with payroll clients need to discuss options with clients as early and clearly as possible.

Therefore familiarity with data requirements is essential to help smooth the AE process and make it a more profitable exercise.

Key data requirements

Accurate employee data is crucial to operating the AE process efficiently.

A common hurdle among early stagers has been that employers underestimated the complexities of AE.

One of the first things to do is check whether the existing payroll solution is compatible with the chosen pension provider. Does it enable the business to meet employee needs, and is it suitable for AE?

If the software can handle the requirements of AE, from that point on it is all about efficiency.

Here are some key data requirements you will need to consider:

  • Employee assessment: Based on employee qualifying earnings and age, payroll can assess and calculate who needs be enrolled. You will need to know what the AE obligations are for each employee based on their employee category, and which employees require to be enrolled on reaching staging date. A record must be kept of each employee’s qualifying earnings. Another point to remember is that earnings figures must relate to each relevant pay reference period.
  • Enrolment: You will need to provide individual employee information to your chosen pension scheme, including the employee’s name, address, date of birth and NI number. It is essential to keep records of NI number, date of birth, gross qualifying earnings and amount and date of contributions of each scheme member for six years, apart from opt-out notices for jobholders, which must be kept for four years.
  • Opt-outs: Eligible employees will have the option to opt out of a pension scheme within a month of being enrolled. Employees who are not eligible will have the option to opt into the workplace pension scheme as well. Opt-out forms must be issued by the pension scheme, not by the employer. In addition, opt-in and opt-out notices must be retained in their original format.
  • Postponement and ongoing monitoring: Employers have the option to postpone AE for up to three months for some or all of their staff, but on the last day of the postponement period each of the postponed employees will need to be assessed to determine if they are still eligible. Once you’ve staged, AE also means you must monitor any changes to employee work status. You should continuously monitor staff to ensure that employees are automatically enrolled when they become an eligible jobholder.
  • Recordkeeping: Poor recordkeeping could lead to significant additional costs in a number of areas. As proof of compliance employers must record information about their employees and their chosen pension scheme for a minimum of six years. For each employee you must keep communication containing opt-in, joining or opt-out notices in a certain format for The Pensions Regulator (TPR)

Conclusion

Put simply, you need to undertake an initial assessment of the workforce as early as possible.

Not only will this enable you to understand more clearly the potential financial and administrative implications for your business or client, but it will also help identify gaps in the data that you currently hold on staff and any breakdowns in processes or procedures between HR and payroll.

The experience with early stagers has highlighted not only the need for clean data, but the requirement for HR, payroll and finance to be able to share data.

The data contained in the payroll files will be the biggest determinant of success.

If you’re an accountant, bookkeeper, adviser or payroll professional, you can use NEST Connect, the free online hub that has all you need to help clients with pension scheme administration. Also take a look at the recent NEST webinar with AccountingWEB and download an essential guide to working with NEST.

AccountingWEB has launched the No-one gets left behind campaign to alert as many accountants as possible to the obligations implied by auto enrolment. Read our simple eight-point statement which sets out the auto enrolment facts you need to know.

Replies (3)

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By raybackler
02nd Mar 2016 12:13

Went live on first one in late February

Nine employee payroll already running in Liberty accounts, so things like NI number and date of birth already in place.  Liberty have introduced an upload file for NEST and another generic upload file for all other pension schemes (that may need tweaking to work with any given scheme).  Entered all the details of the employees on NEST website and sent them standard NEST letters as required.  After payroll run for February, uploaded Liberty file and then checked on NEST website.  Had a couple of minor teething issues, really part of the learning curve for the first client, as expected.  I feel confident that the rest of my client base using the Liberty/NEST combination will work well.  Only issue is when another pension scheme provider is used and I am sure there will be another addition to my learning curve.

I have to say that the whole process was much easier than I thought it would be.  The article above is correct and you will need to put in more time in advance for larger payrolls, but my experience of the Liberty/NEST combination, where nothing was done until a few days before the payroll was due to be run, apart from setting up as an employer with NEST, is that there is really nothing to fear. 

Thanks (1)
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By Catherine Pinkney
03rd Mar 2016 19:44

Free 'Team Assessment' tool for SMEs

Paycircle has launched a payroll platform that integrates fully with NEST. It's been designed with simplicity in mind and is targeted at SMEs staging over the next 24 months and beyond.

The website has some cool free tools including an Employee Contributions Calculator http://paycircle.co.uk/workplace-pension/employee-contributions-calculat... well as a Staging Date Calculator, but by far the most helpful tool is their free Team Assessment tool http://paycircle.co.uk/workplace-pension/ which can tell an employer 'who's in' who needs to be invited and what everyones contributions are likely to be (based upon gross salaries). It's interactive too so that employers can play with 'what if' scenarios. Its report spans the next three years and will tell you at what date employees go over the age threshold and looks at how the numbers change between now and October 18. Employers can even download a free report so that they can share it with their team. If anything changes, they just update their team's info and download another report. All free.

The plan is to have a platform for accountants and bookkeepers too so that everyone can work collaboratively and see the same information. Its all in the cloud and can even be accessed and run from a smart phone. 

Definitely worth a look and the free Team Assessment tool is really handy.

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By raybackler
03rd Mar 2016 22:53

@Caroline Pinkney

Do you have any involvement in the Paycircle business?

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