Automatic Enrolment duties explained

Planning ahead and being aware of the initial and ongoing responsibilities is key to ensuring your business is compliant. Failure to do so could result in fines being issues by The Pensions Regulator (TPR).   

In this article we summarise your employer duties including the administration required and the necessary timeframes that need to be adhered to.  

What are the automatic enrolment duties for employers?  

Under the Pensions Act 2008, all UK employers must put certain staff into a workplace pension and contribute to it themselves too. This system is called Automatic Enrolment.  

Auto enrolment is a legal obligation which employers must comply with. This requires employers to enrol eligible employees into the employer pension scheme. Auto enrolment employer duties start from the first member of staff being employed. If you miss a deadline a penalty could be issued. 

A summary of the initial steps employers need to take are as follows:  

• Choose your employer pension scheme: this is the scheme that is to be used by eligible employees, and should be in place as soon as possible.   
• Establish employees classified as eligible jobholders for enrolment in your employer pension: this is an assessment that needs to be completed from the date each employee commences work, also known as their duties start date. Potentially a deferment may be applicable depending on the policies in place.   
• Write to employees: this is to confirm to each member of staff how automatic enrolment impacts them. Assistance with letter templates can be found on the TPR website and completion of this will be required within six weeks after each of an employee’s duties start date.  
• Complete your declaration of compliance submission: this is an electronic submission that tells the TPR details about the eligible employee. Completion of this is required within five months after the duties start date. 

Auto enrolment rules for employers need to be considered all year round. This will apply especially to employees that have opted out of automatic enrolment. More guidance on this can be found later in this article.  

What are the employer’s auto-enrolment duties?  

As highlighted, employers with eligible jobholders must be aware of their initial and ongoing auto-enrolment duties. To summarise these are:  

• Identify whether an employee needs to be enrolled. 
• Write to employees explaining how auto-enrolment impacts them and next steps. 
• Complete the necessary declaration of compliance submissions for enrolling employees.  
• Make contribution payments each pay period as appropriate. 
• For employees who were not eligible at their initial duties date, monitoring of their earning levels and ages is necessary for future enrolment purposes. 
• Manage ongoing requests for joiners and leavers to the pension scheme.  
• Keep and maintain records of employees and the pension scheme for the statutory time periods.  
• Re-enrolment and re-declaration for staff members that have opted out.  

Further TPR guidance on all of these employer duties can be found on its website.  

Clearly the starting point for employer is establishing who needs to be auto-enrolled and this starts from your employee’s duties date – the first day your new member of staff works for you.

TPR offer a really useful Duties Checker on their website to help establish your responsibilities. This will help summarise the requirements as and when necessary.  

When do automatic enrolment employer duties begin?  

Businesses employing for the first time since 1st October 2017 have been required to comply with automatic enrolment as soon as they recruit a member of staff. Prior to this, employers had more time to prepare for their auto-enrolment duties.  

Auto-enrolment obligations commence from the first date an employee works for you (TPR guidance on this can be found here). Regardless of whether or not enrolment is required, you should write to your employees.  

Prior to 1st October 2017, employers were given a staging date when they needed to comply with their auto-enrolment obligations. To assist The Pension Regulator sent letters to employers alerting them of their duties 12 months prior to the staging date. This legal requirement is now straight away, so obtaining the necessary advice or assistance early on is essential. Our earlier guidance on the steps to follow can be found here. 

Should an employee be eligible, the employer will need to consider their “qualifying earnings” to establish what contributions need to be paid by the employee and the employer. “Qualifying earnings” is made up of number of different pay including salary, overtime, bonuses and statutory payments. A full breakdown of what this is made up of can be found later in the same article.  

For eligible members, employers will need to calculate this each pay period in order to ensure the correct amount is paid into their employee’s pension pot each pay period. 

The Pension Regulator has a useful table which summarises the position which can be found here. Depending on which category an employee falls into, will impact on automatic enrolment duties and records they need to be kept. 

With these legal obligations, it is key for employers to have all the information provided to employees in writing. This will provide the employer with the necessary backing documentation to confirm they are not only meeting their legal obligations, but also ensure that the information supplied to TPR is correct.   

How much do employers need to contribute?  

Once an employer has identified, whether an individual is classified as a ‘worker’ they will subsequently need to enrol them.  

Employers will pay a percentage of an employee’s ‘qualifying earnings’ into their pension pot each time they are paid. This will be made up of employee and employer contributions.  

• Qualifying earnings are made up of:  
• Salary/wages  
• Overtime  
• Bonuses and commission    
• Statutory sick pay 
• Statutory payments; maternity, paternity, adoption  

The minimum an employer can pay is 3% of their employee’s qualifying earnings for the relevant pay period. Employers can, of course, pay as much as they wish to but 3% is the minimum. The minimum an employee can contribute is 5%, so the minimum overall contribution each pay period is 8%. 

Where an individual is not meeting the criteria for an employer to auto-enrol, they can choose to ‘opt in’. Employers are unable to refuse employees. However, employers will not be required to contribute into the scheme if they earn less than the following amounts:  

• £520 per month 
• £120 per week  
• £480 every 4 weeks   

If you employ seasonal or temporary members of staff an assessment for auto enrolment will need to be completed each pay period. This therefore makes the assessment a rather recurring task. However, having suitable payroll software will help assist this process making it much more streamlined. Guidance on The Pension Regulator website regarding seasonal and temporary workers is available, along with a supporting video and checker.  

 Can an employee opt out of automatic enrolment?  

Yes, employees can ‘opt out’ of a pension scheme they have been auto-enrolled into.  

Where an employee opts out within one month, any contributions made will need to be refunded to them. Employees can choose to opt out after the first month, However, any contributions paid will remain in their pension fund. 

Employees can subsequently re-join a pension scheme in the future, however some employers may require this to be completed once every 12 months. To enact this, employees will need to make this request in writing. 

Employers are required to automatically re-enrol employees not in a pension every three years or a date sooner if they choose to. This is called re-enrolment and if completed an employer will need to write to the affected employee.  

For further HMRC guidance on employees opting out and re-joining can be found here.  

In terms of timeframes, employers have the option to defer employees becoming part of the workplace pension scheme by up to three months. This is known as postponement and employers must follow the necessary guidelines confirming this to an employee.    

For more guidance about postponing auto-enrolment click here.  

Are employee pension rights legally protected?  

Safeguards have been put in place to ensure that employees are legally protected in relation to their employer pensions. Employers must ensure that the following does not take place:  

• An action or error is made resulting in an eligible jobholder ceasing to become an active member of the qualifying scheme. 
• An action or error results in the scheme not being classified as a qualifying scheme. 
• Action or influence resulting in a jobholder opting out of a qualifying scheme, or a worker giving up membership of a pension scheme.  
• While hiring the individual, questions or statements must not be made implying the result of employment is based on whether or not they intend to opt out of the pension scheme.  
• Employers must not breach any employment rights in relation to individuals being unfairly dismissed or grounds relating to new employer duties.  

More detailed TPR guidance on these safeguarding rules can be found here. 

If employers do not meet their legal obligations this could result in the following:   

• An initial warning letter highlighting that compliance is necessary.  
• Statutory notices confirming the missed payments and the amount payable. 
• Penalty notices for continued non-compliance in the form of fixed, escalating or prohibited recruitment conduct penalty notices.   
• Prosecution with criminal offences.  

How long is employee information held?  

The maintenance and securing of payroll documentation for employers is very important. Failure to do so could result in penalties being applied. This applies even if auto-enrolment duties are outsourced to a third party. Therefore, having suitable documentation software is of high importance.   

Employers are required to maintain information about:  

• Jobholders and workers: essentially employee details such as, full name, national insurance number, contributions made, qualifying earnings and opt in notices.  
• The employer pension scheme: for example name of the pension scheme, pension reference number and registered address.  

Generally, information about employees and the pension scheme will need to be kept for a minimum of six years. However, a reduced timeframe of four years will be available in certain circumstances, for example four years for opt out notices.  

A summary of all the information that needs to be kept for the relevant timeframes can be found on The Pension Regulator website. It is strongly recommended that this is reviewed and the correct information is maintained, otherwise penalties could apply.  

To confirm employers are meeting their legal obligations and maintaining the correct information, they are required to submit a declaration of compliance. This submission is required within five months from the date their legal duties began.  

A re-declaration submission will also be required in instances of re-enrolment of certain members of staff. Staff members who opted out will need to re-enrolled every three years and regardless of whether or not these staff have been put back onto the scheme, a re-declaration of compliance will need to be completed. More guidance on this can be found here.  

The following will take you to TPR’s guidance on the declaration of compliance checklist confirming the information that needs to be submitted.   

How can TaxAssist Accountants with automatic enrolment?  

At TaxAssist Accountants, we can help administrate workplace pensions schemes and ensure your business remains compliant and up to date.  

If you are concerned about auto-enrolment for your business, or have questions about pension schemes in general we can help. Call us today on 0203 971 5550 or use our online enquiry form to book a free initial consultation.  

Date published 22 Aug 2017 | Last updated 20 Mar 2024

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.