On 6 April this year, the total minimum level of auto enrolment contributions increased from 2% to 5% of the employee’s qualifying earnings. On the 6 April 2019, the total minimum contribution will increase from 5% to 8%. BrightPay’s Karen Bennett outlines how to support your clients and your client’s employees through this transition.
The introduction of auto enrolment saw the beginning of pension contributions being paid into employees’ pension pots. To help employers adapt, and to spread the cost of contributing to their employees’ pension scheme, the government introduced a gradual increase of contribution levels over a period of time known as ‘phasing’.
Employers and employees can choose to pay a higher contribution rate than the minimum contribution requirement set by the government if they wish. Also, employers can choose to pay the entire total minimum amount meaning employees would not have to make contributions unless the rules of the scheme say otherwise. If your client pays more than their employer minimum contribution, but less than the total minimum contribution, then the employee must make up the difference.
Where there are no employees enrolled into the workplace pension scheme then no action needs to be taken. Where an employee does become eligible for the first time, then the employer must implement the new, increased contribution amounts that are applicable at that time period. Phasing increases do not apply to staff asked to be put into a scheme where your client doesn’t have to pay into it.
Supporting your clients with the increases
The Pensions Regulator (TPR) has already written to all employers to remind them about the increases and how it affects their employees. These letters inform employers what they need to do to comply with phasing. The administrative side of implementing the contribution increases should be simple with the help of payroll software.
Your payroll software should easily calculate and deduct the correct contributions for your client. Double check the correct amount is being paid in the first payroll run. Additionally, your client’s workplace pension provider should already have been taking steps to communicate and implement phasing over recent months. It is still up to your client to make sure they are using a qualifying scheme for their auto enrolment duties.
Supporting your client’s employees with the increases
When you first enrolled employees into their workplace pension scheme, it was required by law to write to each employee informing them about auto enrolment and the upcoming increases in contributions.
You are not legally required to write to staff again about the increases but it would be considered best practice to avoid any confusion. Again, the pension provider should have already communicated the increases to their members.
At BrightPay Software, we have a passion for making the financial and administrative aspects of payroll management less time-consuming and easy to use. With years of experience and dedication to this ideal, we have created a range of IT software solutions which are in use by over 55,000 businesses in Ireland and the UK today.