Five things you need to know about auto enrolment & HMRC Basic PAYE Tools
The Pensions Regulator (TPR) have released a basic AE toolkit to try to support HMRC’s Basic PAYE Tool users through their auto enrolment (AE) duties. Currently, BPT users do not have the functionality or facility to process auto enrolment. TPR’s toolkit requires a lot of manual input and, by design, is very basic. The auto enrolment tool works by downloading an Excel spreadsheet where all the data will be stored and processed by the user. In this article we will examine five things you need to know about auto enrolment if you use HMRC’s Basic PAYE Tools.
Manual vs. automation
TPR’s tool will only help BPT users to manually assess their employees and calculate their contribution rates. The results will then need to be input back into BPT. Subsequently, the BPT user will need to log in to their pension provider’s web portal and manually input the figures. Extra time will be needed to complete this process and there will be potential for error.
HMRC’s Basic PAYE Tool users will have difficulty processing other mandatory auto enrolment duties, including opt-ins and opt-outs, postponement, communications to employees, ongoing auto enrolment employer responsibilities and much more. BPT users who have decided to migrate to payroll software which includes integrated automatic enrolment functionality have saved considerable time and effort.
Limitations of the AE Toolkit
The auto enrolment toolkit will only handle qualifying earnings schemes. It will not process automatic enrolment communications nor will it prepare files for upload into pension company portals. This, combined with the fact that HMRC Basic PAYE Tools does not prepare payslips, means that the proposition for a fully integrated payroll and auto enrolment software is much stronger.
The auto enrolment toolkit will not:
Handle auto enrolment communications
Produce payslips with pension contributions
Handle multiple pay frequencies
Process postponement or handle postponement communication letters
Process variable contribution levels
Produce auto enrolment/contribution files for the various AE pension providers.
Costings of auto enrolment
Many employers are worried about the costs of contributing to their employees’ pension schemes. It will be important for employers to work out who needs to be enrolled and calculate how much the contributions are going to cost the employer each pay period. With payroll software, you should be able to produce a report prior to staging that gives an overview of what automatic enrolment will look like.
A pre-assessment report is a useful tool and should include each employee’s estimated pensionable pay, worker category, qualifying earnings and pension scheme contribution amounts. This report will also prove useful in providing you with an overview of your estimated employer contributions that you will need to pay each pay period. Example of pre-assessment report.
It is not a legal requirement to use software to process auto enrolment, however TPR actively encourages employers to use payroll tools that can automate these employer tasks. Good payroll software will have an easy import from HMRC’s Basic PAYE Tools to save time and reduce the workload. The automation of auto enrolment duties will lead to a seamless and straightforward process.
It is also important to note that payroll software that is integrated with various AE pension providers will offer further time-saving advantages. Various payroll software providers have developed API / web services functions where users will have direct integration with the pension scheme e.g. NEST.
There are free or low cost payroll software solutions on the market that can help BPT users to easily streamline the entire auto enrolment process.
Options for HMRC Basic PAYE Tools users
TPR has a list of payroll software packages on their website. Be aware that some payroll software systems may only offer very limited AE functionality, whilst others are charging high fees or an extra fee per employee, per month. Good quality payroll software should provide auto enrolment functionality as standard, include support and be free or competitively priced.
The options for BPT users are:
Use free or low cost commercial payroll software with automatic enrolment functionality
Use a third party (non-payroll) provider (including a pension provider that offers Assessments and/or communications)
Use The Pensions Regulator AE toolkit
To sum up
The bottom line is that many employers, especially HMRC BPT users will continue to struggle with auto enrolment if they decide to process it manually using TPR’s auto enrolment tool. For those employers who resist technological advancements, they will need to be aware of the pitfalls that may arise through manual auto enrolment processing.
Successful employers understand that automation is the way forward, while manual processing is redundant. TPR purposely provided this AE tool with limited and basic functionality to encourage BPT users to consider existing payroll and auto enrolment solutions that are readily available on the market.
Existing payroll software solutions already easily automate automatic enrolment duties including employee assessment, auto enrolment communications, enrolment (including batch enrolment), postponement, ongoing employee monitoring and integration with auto enrolment pension providers.
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