UK Workplace Pensions
From 2012 the auto enrolment (AE) pension scheme was phased in as a workplace pension scheme designed to help people save for retirement as part of the Pensions Act 2008. The Pensions Regulator is responsible for ensuring that all employers now comply with workplace pension law which was fully rolled out by February 2018. UK employers should now provide an employee workplace pension scheme for all eligible staff. For workers who are not eligible, such as the self employed, provision has been made to join alternative pension schemes.
The workplace pension scheme requires automatic enrolment for eligible employees – employers automatically deduct any contributions from wages or salary and pay into the pension scheme on behalf of the employee. As a company the ‘duties start date’ is the date your first member of staff begins working for you.
Who should be enrolled into a workplace pension?
Employers must enrol and make an employer’s contribution for employees who meet the following criteria:
Aged between 22 and the State Pension age
Earn over the threshold (at least £10,000 a year as at 1/6/21)
Normally work in the UK (this includes people who are based in the UK but travel abroad for work). This does not included self employed contractors.
There are additional conditions when an employer does not have to automatically enrol an employee but who have a right to ask to join the scheme:
Are aged either between 16 and 21, or aged between State Pension Age and 74;
Earn over the earnings threshold, and
Work, or ordinarily work in the UK and have a contract of employment (i.e. so is an employee and not a self-employed contractor) or who have a contract to provide work and/ or services personally (so can’t sub-contract to a third party).
Directors and Limited liability partnerships have different regulations and there are further circumstances in which an employee does not have to automatically enrol an employee. At Mascolo & Styles we specialise in payroll management – our team keep up to date with the latest workplace pension regulations and ensure our clients are fully compliant with all eligible employees enrolled into the workplace pension scheme.
A dedicated payroll administrator from Mascolo & Styles will calculate pension contributions for every member of your staff on a fixed fee basis as part of our payroll management service. We will ensure pension contributions are accurate and timely. As payroll professionals we strive to maintain high levels of client satisfaction and diligently ensure your employees pay and pension contributions are processed efficiently.
Workplace pension contributions can be applied in different ways and should be agreed in advance with your pension provider:
Net Pay
Pension contribution is taken before pay is taxed allowing employee full pension tax relief on basic, higher or additional rate.
Relief At Source
Pension contribution is taken after tax and national insurance. The pension provider adds tax relief at the basic rate.
How much should be paid through an employer pension scheme?
The amount paid into a pension scheme by employer and employee can vary depending on which pension scheme you choose. However, by law, you and your employee have to pay a minimum amount into the scheme. Employers must pay at least 3% of employee’s ‘qualifying earnings’ into the chosen pension scheme.
Workplace Pension Contributions |
|---|
| The minimum your employer pays | You pay | Total minimum contribution | |
| From April 2019 | 3% | 5% | 8% |
Our payroll team will identify and calculate ‘qualifying earnings’ for your employee – this is usually the employee’s total annual earnings between £6,240 and £50,270 (before tax).
Auto Enrolement Thresholds |
|---|
2024/25
| Annual Earnings | Monthly Earnings | |
| Lower level of qualifying earnings | £6,240 | £520 |
| Earnings for automatic enrolement | £10,000 | £833 |
| Upper level of qualifying earnings | £50,270 | £4,189 |
An employees total qualifying earnings include:
salary or wages
bonuses and commission
overtime
statutory sick pay
statutory maternity, paternity or adoption pay
Paying workplace pension contributions on time every time.
Contributions should be deducted from your staff’s pay each month. The due dates for paying contributions to the scheme should be agreed with your trustee or provider, but by law it should be no later than the 22nd day (19th if you pay by cheque) of the next month.
Missing a payment or paying an incorrect amount can result in a fine from The Pensions Regulator (TPR), so it is important that your payroll processors are consistently accurate, reliable and efficient. At Mascolo & Styles we have a team of payroll specialists to reply on. Your business will not suffer from inhouse absences due to health or holiday - with a dedicated provider you are always covered.
Workplace pension scheme automation
At Mascolo & Styles will use payroll systems compatible with the top pension schemes. Each time we pay your staff (including new starters), our award winning systems monitor the employees age and earnings to see if they need to be enrolled into a pension scheme and how much to pay in.
Pensions contribution records
According to The Pensions Regulator ‘Incorrect or out-of-date information is the main cause of payment failure and disputes between an employer and their scheme provider or trustees.’
Your duty as an employer means you must keep records of contributions paid into a pension scheme for six years (in most cases).
Records you should keep include:
staff gross earnings
staff and employer pension scheme contributions due to be paid (and if different the actual amounts paid)
Businesses large and small often outsource payroll provision and auto enrolment to an external financial services provider such as Mascolo & Styles. Specialist payroll providers can offer greater efficiencies meaning you benefit from reduced operational and training costs. Records are stored securely and your payroll provider will be proficient in the latest regulations freeing up resources for your businesses to focus on growth.
Making workplace pensions simple
For a small businesses the costs and difficulties of setting up a workplace pension scheme can seem daunting, which is why at Mascolo & Styles we provide a simple onboarding process for our payroll clients. Get in touch with our team today to discuss your employer pension contributions provision, we work on a fixed fee basis with scalable and flexible services adapted to your business’ needs. Call: 01420 O142O 544 444 for more information.
Mascolo & Styles Outsourced Payroll
If you manage a large or small business there are many things to consider – by outsourcing you can remove the stress of managing your own payroll, reduce compliance risk, optimise resources and allow you to focus on your business’ growth. Outsourcing to the right payroll provider will enable your business to reach beyond the capabilities that you can achieve alone.
Whilst there are many advantages to outsourcing payroll management it is important to ensure you choose the right company. Read our guide to choosing the right payroll company to ensure you make the right decision to guarantee your growth.
