How to Prepare your Business for Auto-Enrolment




Here is an article which caught my eye in The Guardian Newspaper which points out the necessary steps you’ll need to take to get your Business ready for the new Auto-Enrolment Legislation…. alternatively, you could just call iQ Business Solutions on 0800 1488 278 and let them do all the hard work for you…

How to prepare your small business for pension auto-enrolment – Soon many UK businesses will have to offer workplace pensions. Cathy Adams of the Guardian has the facts and key dates for SMEs…

The year 2017 might not mean much at first, but it marks an important deadline for small business owners. It’s the year by which every existing UK business that employs staff will by law have to offer – and contribute to – workplace pensions in a process known as auto-enrolment.

According to an official forecast from The Pensions Regulator, more than 1.3m SMEs, micro businesses and new employers are expected to reach their “staging date”, the date by which businesses must offer a workplace pension for employees, over the next four years. For the average small business owner, even the word “pension” can be daunting, but the good news is that there’s still time to prepare to minimise upheaval.

What is it?

The government’s auto-enrolment project was rolled out in 2012 – but only large companies were affected at first. Small companies will begin the process in 2015, with all existing UK companies enrolled by April 2017. New businesses that were set up after 2012 have slightly longer to go through the auto-enrolment process, and staging dates are staggered from May 2017 through to February 2018, depending on when they were set up. At the moment, only businesses that are set up from October 2016 onwards will auto-enrol in 2018. For all existing small businesses, the staging dates will happen throughout 2017.

Essentially, the scheme requires businesses created before 2012 to enrol all qualifying UK staff – those aged between 22 and the state pension age, and that earn at least £10,000 a year during the 2014/15 tax year – into a pension scheme, and pay contributions into it. Employees can opt out (15% are estimated to opt out over the lifetime of the scheme, according to the Department for Work and Pensions) but employers cannot.

There are different bands of minimum contributions. Until the end of September 2017, the total minimum contribution into a scheme for each qualifying employee is 2% of basic pay, made up of 1% from the employer and 0.8% from the employee, as well as 0.2% tax relief from the government added on. This increases from October 2017 to reach 8% in total by October 2018 – with the minimum employer contribution set at 3%, with 4% coming from the employee and the remaining 1% coming from the government in the form of tax relief. You can find out both employer and employee contribution levels using The Pensions Regulator’s tool.

There are added benefits to auto-enrolment. It provides an extra incentive for staff without increasing salaries or providing other benefits such as gym membership or health insurance – extras that are often well beyond the financial limits of small businesses.

Nigel Sanders, finance director of small technology business Fluidata, which auto-enrolled its employees to the government-backed National Employment Savings Trust (NEST) at the end of last year, says offering pensions well ahead of the deadline gave staff an incentive to stay. From a 63-strong personnel, 42 staff have been enrolled so far. Fluidata pays 6% of basic pay into staff pension pots, with the remaining 2% coming from the employee and from tax relief – well above the legal contribution limit. Sanders advises not waiting until your auto-enrolment deadline, as it gives business owners a “true opportunity to give benefits to staff, and leaves time to get used to the system.”

It’s crucial to start preparing for your staging date well ahead of time, as the auto-enrolment “to-do” list can take anywhere from six to 18 months, depending on how complicated your payroll is.

Understand your staging date

Your staging date – the day that auto-enrolment comes into effect – depends on the size of your payroll. The Pensions Regulator has a handy calculator that will work it out from your PAYE reference. The smaller the business, the later the date; and if you only recently set up as a small business, the date will be even later.

Choose a scheme

The next step is to choose a pension scheme, which might require the help of a financial adviser – find one using a tool like Unbiased. Many of the big insurance firms such as Scottish Widows and Standard Life have been proactive in offering workplace pension schemes for small businesses, but there’s also the taxpayer-backed NEST. Some schemes will be more limited in investment options and can be more expensive, so take the time to decide which scheme is right for your staff. While it’s unlikely that any companies will turn away small businesses (although NEST cannot), over the next few years as the deadline approaches demand is going to rise exponentially, so getting staff enrolled into a scheme well ahead of time is wise.


Small business owners aren’t likely to have a pension slush fund already accounted for, so budgeting for your staging date is essential. To begin with, contribution levels are set quite low, but by 2018, employers must pay a minimum of 3% of basic pay per employee into a pension scheme. It needn’t mean instant bankruptcy though, as your pension contributions will lower your National Insurance bill. This is because the employee’s contributions to a pension will come out of their gross earnings, automatically lowering the amount they take home each month, and therefore less NI will need to be paid. See the HMRC’s National Insurance employment basics for more details, or speak to a financial adviser through Unbiased. Your chosen pension fund should also be able to advise on tax implications. Budgeting can be an overwhelming task, so you may want to employ the services of a financial adviser to help. Or alternatively, you could just call iQ Business Solutions on 0800 1488 278 and let them do all the hard work for you…

This entry was posted by Ian Quill on Monday, July 6th, 2015 at 12:30 pm and is filed under Auto-enrolment.

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