- Our application will start Pension auto-enrolment for all the eligible jobholders(employees) of any company once the employer of that company enters the Auto Enrolment STAGING DATE. Without a Auto Enrolment STAGING DATE there will be no auto-enrolment for the company. Of course, by 2018 all eligible jobholders will be subject to auto-enrolment by law. Before 2018 the requirement for Auto Enrolment depends either on the size of the company or whether the employer opts to introduce Auto Enrolment early.
- Auto Enrolment is an initiative by UK government to encourage saving for employees for their old age. The law was introduced in beginning of October 2012.Under the guidelines, employers have to automatically enroll eligible jobholder into a workforce pension scheme, if they aren't already in one. Employees also have the right to ask their employer to enroll them into an Auto Enrolment pension scheme. Depending on the employee age and income, employers also make contributions to this pension scheme, adding to the contributions made by their employee's.
Employers must automatically enroll all employees who are:
- It is Mandatory: Once the employer states the Auto Enrolment Staging Date, or by April 2018, all company eligible jobholders will be enrolled into Auto Enrolment.
- Age: All eligible jobholder aged between 22 and the state pension age
- Income: Earning more than £10,000 a year.
- Location: All jobholders working in the UK.
How much is to be deducted from the jobholder's gross pay for the Auto Enrolment Scheme is determined solely by the employer and the pension provider with the prior approval of HMRC.
In general there are 2 types of auto-enrolment deductions. One is a fixed amount deduction, the other is a percentage of gross pay deduction. Auto-enrolment also means once a jobholder's gross earning hits the threshold the deduction will automatically take place, similar to NIC deductions. If you do not earn enough in any particular pay period, you will NOT be enrolled into paying the Auto Enrolment. Auto-enrolment is calculated on a pay period basis, not on an annual pay basis. However, an employee has the right to make voluntary contributions if his earnings are below the defined threshold.
The auto-enrolment fixed amount deduction or percentage based deduction could be tailored on an individual employee basis, a group of employee basis, or a company wide basis. Whatever basis, the payroll system will not validate its validity and accuracy. Our payroll system will take any instruction given by the employer when the Auto-enrolment Pension Scheme is set up. It is up to the employer to state the details of the Auto Enrolment Scheme which it has agreed with the pension provider accurately. There is no way we can validate the instruction other than accept the given details as is.
Should a jobholder in a company who has enrolled into the Auto-enrolment scheme not be allocated to any instruction stating if a fixed amount or a fixed percentage is to be deducted, we will not do any deduction. We will instead only show a WARNING NOTICE to the payroll manager. It is up to the manager to react to the warning notice to add the pension deduction instruction to deduct on a fixed amount or on a percentage of the gross pay. We will let the payroll to go through if the payroll manager, for whatever reason, chooses to ignore the warning.
Our payslips will show the Auto-enrolment deducted amount, if any. There will be reports showing the individual deduction and consolidated deduction amount for the employer concerned to use to deposit the deducted amount to the pension provider.
For Additional information regarding Auto Enrolment refer to the following details from HMRC,
- Auto-Enrolment (AE) Key Terms
- 9.1 Worker: An employee or
someone who has a contract to perform work or
services personally, that is not undertaking the work
as part of their own business.
- 9.2 Jobholder: A worker who
is aged between 16 and 74, is working or ordinarily works in the UK under their
contract, has qualifying earnings.
- 9.3 Eligible jobholder: A jobholder who
is aged between 22 and state pension age, has qualifying earnings above the earnings trigger
for automatic enrolment.
- 9.4 Non-eligible jobholder: A jobholder who is aged between 16 and 21 or state pension age and 74, has qualifying earnings above the earnings trigger
for automatic enrolment OR is aged between 16 and 74, has qualifying earnings below the earnings trigger for automatic enrolment.
- 9.5 Entitled worker: A worker who is aged between 16 and 74
is working or ordinarily works in the UK under their
contract does not have qualifying earnings.
- 9.6 Qualifying earnings: This includes all of the following pay elements
(gross) Salary, Wages, Commission, Bonuses, Overtime, Statutory Sick Pay, Statutory Maternity, Paternity & Adoption Pay. These earnings are used to identify whether an
individual is a eligible jobholder or a non-eligible
jobholder, and also to determine the level of
contributions a scheme must require.
- 9.7 Automatic enrolment (also called autoenrolment,autoenrol or AE):
When an employer places eligible jobholders into an
automatic enrolment scheme 'automatically', ie
without the jobholder's involvement. An individual
who is automatically enrolled is free to opt out and
can stop saving at any time, but needs to take action
to do so.
The duty on an employer to ensure workers meeting
certain requirements become members of a
qualifying Auto Enrolment scheme without them
having to make any active decisions e.g. complete
an application form or choose an investment profile
(although they can make this choice if they wish).
The employer will use a qualifying pension scheme
to auto-enrol and re-enrol their workforce.
- 9.8 Qualifying Scheme: A pension scheme that meets certain minimum
standards set by legislation. There are different
standards depending on the type of scheme.
- 9.9 Automatic Enrolment Scheme: A qualifying scheme that meets additional criteria to
be an automatic enrolment scheme. Eligible
jobholders who are not already a member of a
qualifying scheme on the employer's staging date
must be automatically enrolled into an automatic
enrolment scheme. The employer will choose the
scheme for automatic enrolment.
- 9.10 Staging: The staggered introduction of the new employer
duties, from 2012, starting with the largest
employers. New PAYE schemes will be staged last.
- 9.11 Staging Date: The date when the new law is 'switched on' for a
- 9.12 Earnings Trigger for Automatic Enrolment: The amount of qualifying earnings a worker must
earn before the duty for their employer to
automatically enrol the worker is triggered. For the
2020-2021 tax year, this is set at £10,000. This figure
will be reviewed annually by the Government.
- 9.13 Lower and upper levels of Qualifying Earnings: A worker's earnings below the lower level and above
the upper level are not taken into account when
working out pension contributions. For the 2020-2021
tax year, the lower level is set at £6,240 and the
upper level is set at £50,000. These figures will be
reviewed annually by the Government.
- 9.14 Phasing: For DC (defined contributions) schemes, the gradual
phasing-in of contribution levels until they reach the
minimum level required by law.
- 9.15 Registration: A duty on employers to tell the regulator information
about the pension scheme they are using and how many people they have enrolled into it.
- 9.16 Postponement: Postponement is an additional flexibility for an
employer that allows them to choose to postpone
automatic enrolment for a period of their choice of up
to three months.
- 9.17 Deferral Period: A Deferral Period allows a company to postpone
running auto-enrolment assessments for up to 3
months after their
- 9.18 Deferral date: The deferral date is the last day of the postponement
period. It is key for the employer as it is the date on
which they must assess their workers and it must be
included in the postponement notice.
- 9.19 Enrolment date: The enrolment date is the start date of active
membership for the jobholders.
- 9.20 Joining window: The one-month period during which enrolment must
- 9.21 Inducement: Under automatic enrolment legislation it is illegal for
employers to encourage workers to opt out or give
up active membership of a qualifying pension
scheme. This is known as ‘inducement’, an example
of which would be where an employer offers
employees cash or any other benefit not to join a
qualifying pension scheme.
- 9.22 Opt-out notice: A written notice to opt out given by a jobholder to
their employer. If the jobholder wishes to opt out after receiving
enrolment information, they must do so by giving an
opt out notice to the employer which is usually
provided by the pension scheme. On receipt of this
notice the employer must refund contributions that
have been deducted.
- 9.23 Opt-in (also Opting in): A non eligible jobholder has the right to opt in to their employer’s qualifying pension scheme.
If a non eligible jobholder decides to opt in by giving
their employer an ‘opt in’ notice, then the employer
must enrol them into the qualifying pension scheme
and make minimum contributions.
- 9.24 Opt-out (also Opting out): Eligible jobholders who have been automatically
enrolled into a qualifying pension scheme and noneligible
jobholders who have opted in, have the right
to opt out within 1 month of the beginning of their membership, by completing an opt out notice. In this event, the jobholder is treated as if the enrolment
that had just taken place had not happened.
A jobholder is able to opt out of the scheme but not out of Automatic Enrolment.
To be able to opt out, the jobholder must have
become an active member of the pension scheme
under Automatic Enrolment or opt in provisions and
have received the enrolment information from their
- 9.25 NEST (National Employment Savings Trust Corporation): A pension provider available to all employers who
want to use it. NEST is a Auto Enrolment scheme
designed for Automatic Enrolment that is available to
any UK employer regardless of the organizations’
- 9.26 Department of Work & Pensions (DWP): Policy owner and responsible for
enabling and coordinating activity for the
programme. Defines the communication required
between employers and employees.