How will auto enrolment affect you?
If you are a business who employs at least one employee, then the auto enrolment law is likely to affect you and your employees. In 2017, Taoiseach Leo Varadkar announced that all employees will be auto enrolled in a pension scheme in just over three years. Varadkar has announced that the auto enrolment pension reform will take place by 2021.
"This issue has been long-fingered for too long, and now that the economy is recovering strongly we must act decisively, and we will publish a five year roadmap for pension reform before the end of the year.”
Contributions are likely to be based on a percentage calculation where the employer will contribute a percentage of the employee’s earnings and the State may also contribute a percentage. The finer details of how this will all work are yet to be finalised.
How does auto enrolment work in the UK?
The UK rolled out auto enrolment in 2012. Ireland is looking to the UK as a model of how to roll out the pension reform. The Irish government will also look to learn key lessons from the mistakes that the UK made in implementing auto enrolment. In the UK, auto enrolment has been a relatively straightforward process for employers who utilised payroll software to carry out the employer tasks. For employers who used manual processes or basic payroll products that didn’t have auto enrolment functionality, the process was more complicated and prone to errors.
The auto enrolment process in the UK
- Staging date: The Pensions Regulator issued staging dates to each employer which is the date which an employer must begin their auto enrolment duties.
- Choose a pension scheme: Employers must choose a qualifying workplace pension scheme to enrol their employees into. However, not all pension providers will accept all employees into the scheme and some will charge employers a setup fee.
- Employee Assessment & Enrolment: All employees must be assessed to establish what worker category they fail into, being either an eligible jobholder, non-eligible jobholder or entitled worked. By law, all eligible employees must be automatically enrolled into the employer pension scheme. All other employees can either opt in or join the scheme.
- Informing Employees: Within six weeks of the staging date, all employees must receive communications informing them how auto enrolment will affect them and what their rights are.
- Paying Contributions: Both employers and employees must pay contributions to the pension scheme based on a percentage of the employee’s earnings. Ideally, contribution rates should be set up in the payroll software and must be paid each pay period. Contributions must be shown on an employee's payslip.
- Ongoing Duties: Employers must monitor employee's age and qualifying earnings on an ongoing basis to keep track of any changes to an employee's worker category. If an employee reaches the criteria of an eligible jobholder (i.e. if they turn 22 or their qualifying earnings) they may need to be automatically enrolled into a pension scheme.
- Declaration of Compliance: Employers must complete a declaration of compliance 5 months after the staging date to inform the Pensions Regulator that they have fully complied with the law. Failure to complete the declaration or fully complete the mandatory auto enrolment duties will result in fines and penalties.
- Automatic Re-enrolment: Every three years, all employers must complete their re-enrolment duties where they will need to re-enrol certain employees back into a workplace pension scheme. They must also complete a re-declaration of compliance every three years, again, to inform the Regulator that they have complied with re-enrolment.
- Postponement: Employers can choose to postpone their auto enrolment duties for up to three months, for some or all employees. This does not change the declaration of compliance date. Postponement cannot be used for re-enrolment.
With BrightPay it’s simple. Auto enrolment is easy once you utilise the correct payroll software tools to automate the administrative tasks. We have the experience to guide you through the process. BrightPay will offer auto enrolment functionality at no additional cost. All BrightPay payroll packages will include auto enrolment plus free phone and email support to help you through your auto enrolment journey.