A workplace pension, usually set up by employers, is a retirement savings scheme to provide people with an income after they’ve stopped working. Most employers have a legal obligation to automatically enrol eligible employees into a scheme—and they will also make contributions on employees’ behalf, too. With automatic contributions, a percentage of pay is taken from employees’ wages each payday, and employers must also pay into the scheme. To be eligible for automatic enrolment, employees must meet certain criteria. Firstly, they must qualify as a ‘worker’, be aged between 22 and the state pension age, earn at least £10,000 per year, and work in the United Kingdom.
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What is a workplace pension?
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Pay & benefits are what your employees receive for the work they do for your company.
The following are mandatory benefits employees must receive, retirement pay, holiday pay, maternity/paternity pay, and sick pay, as well as their salary.
There are other types of benefits you can give your employees, such as bonus schemes, company cars, employee expenses, and share schemes.
Peninsula can offer you expert advice on pay & benefits, ensuring you pay your staff correctly and avoid claims being raised against you.
Yes, if you don't pay your staff their legal entitlements claims can be raised against you. This could lead to financial damages being paid,
Pay inequality has been a prominent, ongoing issue in the UK economy for years. Not only through gender, but the government has recently found disparities within ethnic and disability demographics.
When it comes to paying staff, employers must ensure the right amounts are given – especially for those not on full-time contracts. Pro rata ensures these employees are compensated correctly; and that includes wages, holidays, and benefits.
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By 2018, all UK employers will be required by law to automatically enroll eligible members of staff into a workplace pension scheme. This is to prepare them for when they choose to from work.
The auto-enrolment system was initially introduced in October 2012 as a legal requirement for large organisations only, with smaller organisations phased into the scheme year on year.
It will eventually be the obligation of all employers to establish their own pension scheme or use the government scheme set up specifically for this purpose.
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Employers are required to enrol workers – both part-time and full-time – in a workplace pension scheme providing they meet the following criteria:
The employee works in the UK.
The employee earns more than £10,000 a year (tax year 2016-17)
The employee is not already in a suitable workplace pension scheme
The employee is at least 22 years old, but under State Pension age
Opting out
Although all eligible employees must be automatically enrolled whether they want to or not, individuals can then choose to ‘opt out’ of the scheme at any time. However, the employer must follow the same process again to automatically enrol these workers in a pension scheme three years later.
Categories and employer contribution
Employees are assigned a particular category depending on their age and level of income. This category then determines whether or not the employer has to contribute to the pension, and how much they are due to pay in. Employers must initially contribute a minimum of 1%, but this level will increase to 2% from April 2018 – March 2019 and then 3% thereafter.
The law behind pensions
The Pensions Act 2008 is the main legislation covering workplace pensions.
Summary
By 2018, all employers must automatically enrol their eligible employees in a workplace pension scheme.
Once automatically enrolled, employees then have the option to opt out if they wish, however they must be automatically re-enrolled once three years has passed.
Employer contribution is set at an initial 1%, rising to 3% as of April 2019.
FAQs: What is a workplace pension?
When do employers’ duties start?
Employers’ legal duties commence on the ‘duties start date’, which is the day when an employee starts work.
What is a ‘Declaration of Compliance’?
Employers must submit this mandatory report to The Pensions Regulator (TPR) within five months of their duties start date. This must be completed even if employers have no eligible staff to enrol.
Can employers delay enrolment for new staff?
Employers can rely on ‘postponement’ to delay assessing and enrolling staff for up to three months. However, if this route is taken, employers must notify impacted employees within six weeks of their start date.
How much do employers have to pay?
They must contribute a minimum of 3% of an employee’s ‘qualifying earnings’.
When should employers pay the contributions?
Both employer and employee pension contributions should be paid to the provider by the 22nd of the month following the deduction.
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