So this is what it all boils down to. How much will Auto Enrolment cost? Well, it’s no surprise that the main costs will be your contribution to the pensions of the eligible staff.
The Government has set minimum contribution requirements to ensure each worker has adequate pension provision and in an attempt to lessen the impact on employers, the contribution levels are being introduced on a phased basis and can be found below:
• Before October 2017 | 1%
• Oct 2017 – Sep 2018 | 2%
• From October 2018 | 3%
The corresponding rates for worker contribution are 1%, 3% and 5%.
It’s important to note that these are the minimum rates, (you may wish to reward your staff with more) and that the rate applies to “qualifying earnings”. For the 2014/2015 tax year, this is earnings between £5,772 and £41,865.
The pension regulator provides a handy tool to enable you to calculate your contributions, you can view it by clicking here:
Outside of your contributions, there are likely to be other costs associated with implementing and maintaining automatic enrolment. You may need to bring in external help to set up the process, you may need to take on an additional member of staff to manage it and if you are managing it in-house, you’ll need to make sure you have the right software in place that can handle the requirements of auto enrolment.
Many modern payroll systems will have this, but if yours doesn’t or you don’t have any at all, here are some question to ask payroll software providers:
Can it identify whether your staff need to auto-enrol?
Can it calculate pension contributions?
Can it handle opt-in and joining?
Can it handle opt outs and refunds?
Can it support you in generating and issuing letters to your staff?
If you’re selecting new software, it’s important to ensure that it’s compatible with your existing systems too.
With all these additional changes, it’s a good idea to take on third party advice, such as from an accountant or a financial adviser. To book an appointment with Credius, call 020 7562 5858 today, or email email@example.com. If you need a bit more information why not visit our website? – www.credius.com.
Next time: Choosing your Auto Enrolment Scheme