Auto enrolment doesn’t need to be complicated, but it does require employers to ensure they are organised, accurate and regularly monitoring deadlines. Here are some common, and less obvious, errors with auto enrolment that we come across when taking on a new payroll client.
- Not enrolling a director’s spouse into a pension scheme
As long as the spouse is an employee of the company and not a director without an employment contract, auto enrolment rules will apply as it does to all employees
- Excluding employees who’ve said they don’t want to be in a scheme
All employees must be enrolled into a workplace pension, even if they have expressed that they don’t want to be. Once enrolled, if they do not want to remain in the scheme they need to opt out of it directly with the pension provider
- Incorrectly calculating tax relief for employees on their pension contributions
Depending on how the pension scheme has been set up, the employee either receives tax relief on their pension contributions in their payslip OR directly in their pension pot. Not understanding which calculation basis to use is a common mistake and results in either over or underclaimed tax relief
- Missing the three-year re-enrolment window
Every three years The Pensions Regulator requires employers to re-assess all employees and re-enrol those who are eligible but are not in the scheme due to opt outs etc. The final step is to submit a declaration to The Pensions Regulator and failure to do so can result in very hefty fines
- Failing to communicate properly to employees
It is a legal requirement for employers to provide employees with a letter explaining their auto enrolment status and options
- Not understanding what should be included in earnings basis for calculations
When setting up a pension scheme, you need to specify which earnings will be used to calculate pension contributions. For example, contributions can be made on qualifying earnings (the minimum requirement), salary only, salary plus bonus etc. If the payroll is not set up to calculate these correctly it will result in over or underpayment of contributions
- Not keeping accurate and up to date records
The Pensions Regulator requires all employers to keep records of all auto enrolment activity and can request these at any time
If you would like to talk to us about the services we offer to ensure clients don’t make these errors, please get in touch.