The latest Clay Shaw Butler Money Matters column from the Carmarthenshire Herald
The latest Clay Shaw Butler Money Matters column from the Carmarthenshire Herald.
By Mark Jones, director of Carmarthen-based Clay Shaw Butler chartered accountants and business consultants.
You’ve probably heard the phrase ‘pensions auto enrolment’ but not really grasped what it is all about.
So, over the next couple of weeks, this column will attempt to explain what is going on.
The Government is placing greater responsibility and sometimes higher costs on employers.
Employers are/will be required to provide access to pension provision for their employees.
If you are an employer in West Wales we, at Clay Shaw Butler, can provide help and advice regarding your auto-enrolment responsibilities.
These are some of the topic areas to keep in mind . . .
The role of the employer:
To encourage more people to save in pension schemes, the Government has placed greater responsibility on employers to provide access to pension provision.
Up until 1 October 2012 there was no requirement for an employer to pay employer contributions into a scheme.
There was also no requirement for the employee to enter an employer provided scheme.
Most employers were however obliged to designate a registered stakeholder scheme that employees could join.
This obligation has been removed due to the advent of automatic enrolment (or auto enrolment).
What is automatic enrolment?
Automatic enrolment places new duties on employers to automatically enrol 'workers' into a work based pension scheme.
The main duties are:
- assess the types of workers in the business
- provide a qualifying automatic enrolment pension scheme for the relevant workers
- write to most of their workers explaining what automatic enrolment into a workplace pension means for them
- automatically enrol all 'eligible jobholders' into the scheme and pay employer contributions
- complete the declaration of compliance and keep records.
Whether this is an easy or difficult task depends on the type of business.
A business which uses the services of casual workers, very young or very old workers will need to spend some time in analysing its workforce.
A business which only employs salaried staff will have an easier task.
A 'worker' is:
- an employee or
- a person who has a contract to provide work or services personally and is not undertaking the work as part of their own business.
Such people, although not employees, are entitled to core employment rights such as the National Minimum Wage.
Individuals in this category include some agency workers and some short-term casual workers.
There are three categories of workers: eligible jobholders; non-eligible jobholders; and entitled workers.
An 'eligible jobholder' is a worker who is:
- aged between 22 years and the State Pension Age
- earning over the minimum earnings threshold (£10,000 for 2015/16 and 2016/17)
- working or ordinarily working in the UK
- not already in a qualifying pension scheme.
These are the workers for which automatic enrolment will be required.
Other workers (non-eligible jobholders) may have the right to either 'opt in' (i.e. join a scheme) and therefore to be treated as eligible jobholders.
'Entitled workers' are entitled to join the scheme but there is no requirement on the employer to make employer contributions in respect of these workers.
The categorisation of workers can be difficult in some circumstances.
Please contact us at Clay Shaw Butler if you are unsure of how to assess the types of workers you have.
The Money Matters column will explain more about auto enrolment next week.
You can find out more about money matters on the Clay Shaw Butler website (under our news for business section) -
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