One common problem we encounter with small and micro business clients we help with Auto enrolment is not so much the process but the delivery details. Many who leave it late and rush to comply before their staging date are tripped up by delivery issues such as who to enrol, staff payment management (deductions) and communication with scheme members and the pension scheme managers. The problems are amplified for businesses with high employee turnover or those employing people on short term contracts.
If planned out in good time payroll software can perform many tasks automatically (or at least semi-automatically) but as outlined below, software selection and implementation are not as easy as it may first appear. If the right software is in place it can be relatively easy to establish who should be enrolled in the pension scheme and on what terms. Failing that the task can be completed manually but whatever route is chosen decisions need to be made well before the staging date.
Depending on age range and salary bracket employees fall into three categories, those who must be enrolled, those with a right to opt in and those with a right to join. There is also an option to opt out but this must be carefully documented as it is an offence to put undue pressure on any employee to opt out. The pensions regulator website provides full details on employee auto enrolment joining criteria.
For employers to comply with the legislation, on the first scheduled payment date after the staging date eligible employees must be enrolled in the chosen pension scheme. Once staff have been enrolled, the employer must continue to pay regular contributions into their pension scheme.
Most of our business clients, who handle payroll in house, tend to be happy with their current payroll software. Often, they have spent time and effort getting to know the software product, it is well understood and integrates well with their other systems and processes. The first task is, therefore, to understand if the current software product is capable of handling auto enrolment payroll issues.
Either the existing Payroll software or bolt on auto enrolment module must be capable of:
- Calculating any bonus payments and their impact on earning criteria.
- Stopping contributions (if allowed by the chosen pension scheme) if an employee’s wages fall below the criteria.
- Facilitate adding new employees to the scheme.
- Hold basic information required for automatic enrolment, including earnings and employee details (name, address, N.I numbers, dates of birth etc.).
- Calculate how much the employee and employer must pay and make appropriate additions/subtractions including the correct tax relief.
- Send the correct employee contributions and data (crucially – in the correct format) to the pension scheme manager.
- Generate communications (eg letters or emails) for your employees as required by the legislation.
- Finally, to keep records for six years.
There are many Payroll software products on the market. Some of the most popular appear to be SAGE 50 (desktop), SAGE One (Online), Moneysoft, and BrightPay but there are many more. There are also bolt on modules available to deal with Auto enrolment payroll issues. The problem is to check the capabilities of the software and what it is/is not capable of delivering.
Some are not capable (or have limited capability) of handling employee communications. Some are only compatible with certain pension providers. Of course, your Accountant can help with the selection of Payroll software but their focus is often payroll based rather than the choice of the best pension provider.
At The Pension Review Service, we are auto enrolment pension specialists with a detailed knowledge of choosing the best pension scheme to fit the needs of any business. We also understand the issues surrounding Payroll software. For a no obligation discussion why not call us on 0800 043 or email firstname.lastname@example.org
Whatever Auto enrolment payroll system you choose it is always sensible to test it works to your satisfaction and integrates correctly with the chosen pension scheme well ahead of the staging date. The Chartered Institute Of Accountants website provides some test criteria.
Should you wish to discuss your auto enrolment payroll issues, pension scheme selection or who to enrol please complete to form below and we will call you back for a no obligation discussion. We are FCA Authorised and regulated and operate across the U.K.
The information in this article does not constitute financial or other professional advice.