Pension auto-enrolment

Auto-enrolment is a government scheme that legally requires you as an employer to add certain employees on to a workplace pension scheme, without them needing to do anything. It affects every business with one or more workers.

You are also required to pay a contribution into the pension pot with each payroll run. Your employee will also make a contribution.

Who is eligible?

All employed workers who meet the following criteria will need to be enrolled onto a workplace pension scheme:

  • Aged between 22 and State Pension age
  • Earn more than the earnings threshold – currently £10,000 per year
  • Work, or ordinarily work in the UK and have a contract of employment, or who have a contract to provide work and/or services personally

The legislation does not cover self-employed contractors or sub-contracts to third parties.

How much needs to be contributed?

Currently both the employer and the employee will each need to pay 1% of qualifying earnings into the employee’s pension pot, making a total contribution of 2%. This is set to rise in October 2017 and again in October 2018.

Auto Enrolment

What happens if I don’t comply?

If you don’t meet your auto-enrolment obligations, you will face a fixed fine of £400 from the Pensions Regulator – payable within a specific period. In more severe cases, you could also end up being charged additional penalties. These have a set daily rate and range from £50 to £10,000 depending on the number of staff you have. Here is a rundown of how much you could be charged:

Auto Enrolment 2

If you fail to pay the required contributions, you could face a fine of up to £50,000, while employees are charged up to £5,000.

What if an employee doesn’t want a pension scheme?

Your employees can choose to leave a pension scheme during the ‘opt out period’ – normally one calendar month from the date on their ‘new joiner’ information. If a worker wants to opt out, you should provide them with an opt-out form and have them return it back to you.

You will then need to take the employee off the scheme, so that any contributions made can be refunded. If they decide to opt out after the one-month deadline, they lose the right to a refund and can choose to have the money remain in the pension pot or have it transferred.

By law, you will need to re-enrol all employees who have opted out of the scheme every three years, as long as they still meet the eligibility criteria. They can then choose to leave again if they want.

Can I be exempt from auto-enrolment?

Yes – but only if you don’t have any employees. If this is the case, you can apply for an exemption with the Pensions Regulator.

How can ClearSky Business help?

As one of the UK’s leading small business advisory firms, we are working with one of the top pension providers to ensure our clients comply with their obligations without any additional hassle.

We offer an extremely competitive package, giving you complete peace of mind that everything’s being taken care of. That’s because all your employees will be enrolled onto an HMRC-approved pension scheme – so you know you will be compliant at all times.

Want to know more?

If you’re worried about auto-enrolment, we can help. Our dedicated team is on hand to answer any queries you may have, and can take care of all your obligations for you – leaving you free to get on with running your company.

For more information, or to join us, please call 08000 149 597 or email

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