Communicating the minimum contribution increases to clients
The total minimum contribution rate is due to increase in April 2018 rising from 2% to 5%. On the 6th April 2019, the total minimum contribution rate will increase further from 5% to 8%. This is known as phasing. The Pensions Regulator (TPR) is sending out letters to all employers informing them about the increase in the total minimum contribution rates. Employers need to ensure their payroll software can automate these increases and deduct the correct amount from the 6th April 2018 and 6th April 2019.
Supporting your clients with the increases
The increase in minimum contributions should be simple to process using your payroll software. Your clients will need to be prepared to pay the additional employer minimum contribution rate. It will be important that also clients understand that their employees’ minimum contribution rates will also be increasing. Some employers are concerned about the affordability of the increase on their employees.
Failing to prepare could mean your clients may not pay the correct amount to the workplace pension scheme on time. This would put your client at risk of non compliance and they could face fines by TPR.
Qualifying workplace pension scheme providers will already be making changes to support the increases, and should communicate this to their clients. It is your client's responsibility to ensure they continue to use a qualifying pension scheme for their automatic enrolment duties.
For payroll bureaus, it would be good practice to communicate these increases to clients. There is no legal requirement to write to clients’ employees, however again it may be something that would be worth doing to ensure a seamless transition to the higher contribution rates.
Free CPD Auto Enrolment Webinars
BrightPay has teamed up with Aviva, NEST and Henry Tapper from the Pension Playpen to bring all payroll bureaus a series of free CPD accredited webinars.
5th Oct - CPD Webinar: New Employers & their Auto Enrolment Obligations
- BrightPay: New Employers & their Auto Enrolment Obligations
- NEST - Helping make auto enrolment work for you
10th Oct - Webinar: The Future of Auto Enrolment
- BrightPay: Auto Enrolment: This is what you must know this year
- Guest Speaker | Pension Playpen: All you NEED to know about choosing a pension scheme
- Employers named and shamed for AE non compliance
- New Employers & their Auto Enrolment Obligations
- Working with HMRC's Basic PAYE tool clients without payroll software.