We understand that auto enrolment is one aspect of being an employer that causes care and support employers some worry, so here we go into some detail about it. For an overview of other obligations that you may have when taking on a PA, go to our dedicated employment law section.
What is auto enrolment?
Are all employers affected by auto enrolment?
When does auto enrolment begin?
What criteria must my PA meet to be auto enrolled?
What if my PA is self-employed?
What if I don't have anyone I need to auto enrol?
What should I do to get ready for my staging date?
What exactly should I do on my staging date?
What if my PA wants to opt out of the pension scheme I have put them in?
How much will I have to pay into my PA's pension?
My PA's income varies – how does auto enrolment apply?
How do I declare my compliance with auto enrolment?
I've missed my staging date – help!
What happens if a worker leaves?
Auto enrolment software
Auto enrolment and salary sacrifice
What if my PA has questions about auto enrolment?
Where can I get further information?
As people live longer, the Government believes too many people are not preparing for what could be a long retirement. Automatic enrolment means all employers have to automatically enrol certain staff into a pension scheme and make contributions towards it. Usually the staff member will also have to make contributions to the pension scheme which the Government may top up with tax relief. If they do not want to be in the pension scheme, the staff member must actively choose to opt out (although they may ask to re-join the scheme at a later date).
Some of the keys things you will have to do as an employer under auto enrolment include:-
- Knowing your ‘staging date’
- Putting in place a pension scheme
- Checking which workers are affected
- Writing to them
- Making payments of pension contributions
- Completing an online form as your declaration of compliance
We talk about these things in more detail below.
Automatic enrolment affects all employers with staff in the UK. There are no exceptions.
This means that as a care and support employer, you will have to comply with the rules.
This may be daunting but The Pensions Regulator (which is in charge of auto enrolment) has specific help for care and support employers, including this video which gives an introduction to what you need to do and where to find help.
They will send you regular letters and emails to keep you up to date with tasks you need to complete (they will get your details from HMRC). It is therefore important that you confirm with The Pensions Regulator who they should contact (this will probably be yourself, unless you are asking someone else to help you, for example an accountant).
The date your auto enrolment duties come into force is known as your ‘staging date'. On this date you must work out who, if anyone, you need to put into a pension scheme.
New employers starting from 1 April 2012 to 30 September 2017 will have staging dates to join between 1 May 2017 and 1 February 2018. Employers who become an employer from 1 October 2017 will not have a pre-determined date for their staging date the rules say that their auto enrolment duties should start on the date they first pay a worker through PAYE - i.e. near instantaneously (although our understanding is that there will be the option to postpone auto enrolment for up to three months for new workers).
The Pensions Regulator has a tool to help you work out your exact staging date using your PAYE reference. An example of a PAYE reference is 913 / WZ5121A – this will have been issued to you when you registered as an employer with HMRC .
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The rules say you must automatically enrol all staff who, on your staging date:
- are aged 22 to state pension age, and
- are working in the UK – under a contract of employment (or a contract to perform work or services personally and not as part of their own business – see later), and
- have ‘qualifying earnings’ over £10,000 a year (the limit will be frozen at £10,000 for the foreseeable future).
Qualifying earnings include your PA’s wages or salary, bonuses, overtime as well as other items, such as statutory pay, before any tax or National Insurance contributions are deducted.
£10,000 a year translates into the following amounts depending on how often you pay your worker:
The Pensions Regulator have a guide to help you work out who you need to automatically enrol into a pension scheme.
If your PA does not initially meet the eligibility criteria to be automatically enrolled, they might do at some stage in the future, for example if their earnings change. You must therefore monitor them and if they become eligible for automatic enrolment at a later date, enrol them at that point.
Individuals with a contract of employment will be covered by automatic enrolment. But what if your PA does not have a contract of employment?
If they provide services to you under a different arrangement, i.e. they are ‘self-employed’, but undertake to perform those services personally for you (i.e. you would not be happy for them to send someone else in their place if they were not able to turn up themselves), then they will likely be considered a ‘worker’ for employment law purposes and will be covered by auto enrolment, even if they are not your actual employee. You can find more detail on identifying whether a person is a ‘worker’ in this guidance from The Pensions Regulator.
You do not have to worry about auto enrolment at all if your PA is considered genuinely self-employed for employment law purposes rather than a ‘worker’, i.e. they can decide what work they do and when, where or how to do it, can hire someone else to do the work or work for more than one client.
If your PA is considered genuinely self-employed then you may need to tell The Pensions Regulator that you are not an employer. Please note that this facility is not for you if you are an employer but have no one to enrol on your staging date. A different process applies in this case.
Even if you do not have any workers to automatically enrol in to a pension on your staging date, you must tell The Pensions Regulator by completing and submitting a ‘declaration of compliance’.
It is also your legal duty to write to your staff individually to explain this. More information and template letters that you can use are available on The Pensions Regulator’s website.
If you have assessed your staff and know that you don't have a PA who needs to be put into a scheme, you can bring your staging date forward so that you can complete your declaration of compliance early and tick automatic enrolment off your to-do list. (This is not the end of the story however, as you have to continually monitor your PA’s age and earnings and in any case, after three years, deal with the ‘re-enrolment’ process.)
Please note that your PA can ask to join a pension scheme, even if they are not required to be automatically enrolled, and you may have to pay into the scheme on their behalf:
- Non-eligible jobholders – for example those aged 16 to 74, earning from £5,876 (in 2017/18) to £10,000 or those aged 16 to 21 or state pension age to 74 and earning at over £10,000. These workers are entitled to opt in, with an employer contribution.
- Entitled workers – those earning under £5,876 (in 2017/18). These workers are entitled to join a scheme but are not entitled to an employer contribution if they do so.
You can find a useful diagram explaining all the different categories of worker on The Pensions Regulator’s website.
Additionally, staff whose automatic enrolment has been postponed by their employer can also choose to opt in to the pension scheme during the postponement period. You can read about postponement below.
The Pensions Regulator has a duties checker tool to help you plan the action you need to take in the run up to your staging date.
It is best to start looking into what you need to do now as far as possible in advance of your staging date, so that you are ready. Ideally, you should allow six months or more to get ready for auto enrolment.
One of the main things you will need to do is to choose a pension scheme to use. You will need to choose a scheme that meets the requirements of automatic enrolment. You can find some advice on finding a pension scheme provider on the Pensions Regulator website.
To make it easier for employers to comply with the requirements the Government has set up a simple, low-cost ‘default’ scheme called the National Employment Savings Trusts (NEST) which employers may use if they wish.
When considering whether NEST is the appropriate scheme to enrol your staff in, you may wish to consider some of the points set out in The Pensions Regulator’s guidance on what to look for in a pension scheme. For example, if your PA is Muslim, you may wish to ensure that the pension scheme you select has a Sharia compliant investment option within the overall scheme that they can choose to put their funds in if they so wish.
Other pension schemes are available. For more information see The Pension Regulator’s website. Under the ‘Find a scheme yourself’ tab on that page, there is a list of schemes that say they are open to small employers.
On your staging date you must carry out a formal assessment of who to put into the pension scheme that you have chosen (unless postponement is being used, see below).
Once your assessment is done, you must ensure eligible staff are enrolled by sending the pension scheme that you have chosen the information they need to make them active members of the scheme. You have six weeks to do this.
Once you've put your PA into a pension scheme, you need to write to them to let them know. In the letter you must tell them:
- the date you have added them to the pension scheme
- the type of pension scheme and who runs it
- how much you will contribute and how much they will have to pay in
- how they can leave the scheme if they want to
There are strict obligations about what you have to tell your workers and when but The Pensions Regulator has prepared templates to help you comply. Some pension schemes or payroll software packages will help you handle the communications.
You should remember that reaching your staging date should not be looked on as an end in itself. You will have ongoing obligations. For example, you will need to pay money into your PA’s pension scheme and keep accurate records of what you have done. When new workers join, you must auto-enrol them if they meet the age and income thresholds and, every three years, you have to automatically re-enrol employees who have opted out. Again, some payroll software packages will help you carry out these types of tasks.
Every worker has one calendar month after being auto enrolled into a pension scheme in which they can choose to opt out. They must do so by giving an ‘opt-out notice’ to you, which is usually provided to them by the pension scheme in their welcome pack.
When an employee opts out within the time frame given, any money paid over to the pension scheme, should be refunded to you. You are then responsible for repaying any employee deductions made back to the employee via payroll. This repayment to the employee must be made as soon as possible.
If the employee opts out after the initial one month period, they can cease their active membership of the pension scheme but usually will not be able to claim any contributions back.
A worker who has opted out does not need to be assessed again until your next re-enrolment date (occurs approximately every three years).
You should note that any decision to opt out must be your employee’s alone – it is against the law to try and persuade or compel your employee to opt out of auto enrolment.
You can find detailed guidance for employers on processing opt outs on The Pensions Regulator's website.
It is possible for an employer to legitimately postpone automatically enrolling an employee for up to 3 months. Postponement can be used at any of the following times:
- at the employer’s staging date for any workers employed on their staging date
- from the date an employee first becomes an eligible jobholder, if this is after the staging date
- on the first day of employment for any worker starting employment after the staging date.
Postponement means that if you expect your PA to be with you for a very short period only for example, you might not have to auto-enrol them, even if they are otherwise eligible.
If you wish to postpone your staff, you must write to them individually to explain this. More information on postponement and template letters that you can use are available on The Pensions Regulator’s website.
You can also find detailed guidance for employers on applying postponement on The Pensions Regulator's website.
You will have to pay the minimum legally required level of contributions into the pension scheme you select. The amount will be based on a percentage of your worker’s 'qualifying earnings'. Qualifying earnings include your PA’s wages or salary, bonuses, overtime as well as other items, such as statutory pay, before any tax or National Insurance contributions are deducted.
The relevant percentage will apply to any qualifying earnings your PA has over £5,876 (for 2017/18) up to the limit of £45,000. The £5,876 and £45,000 yearly amounts translate into the following figures depending on how often your PA is paid:
|£5,876 a year||£45,000 a year|
Up until April 2018, the employer contribution is 1% but it is set to rise as follows:
|Employer minimum contributions||
Total minimum contribution
(i.e. employer and employee)
|Up to April 2018||1%||2%|
|April 2018 to March 2019||2%||5%|
|From April 2019||3%||8%|
Your PA Marcie earns £213 per week. Neither you nor Marcie pay pension contributions on the first £113 of pay, thus you will each pay contributions based on £100 (£213 less £113) each week. As the relevant minimum contribution rate is currently 1%, both you and Marcie will put £1.00 into her pension scheme each week.
You can find out more about the minimum contributions on GOV.UK. You can decide to pay more than the minimum.
If you pay for your PA using money from the Government, for example a direct payment from your local authority, it is possible that they will increase the level of funding to take account of the cost of auto-enrolment however this is something you would need to raise with them.
Your employee will also probably have to contribute to the pension, as per the table above. If they do, the Government may also pay into the pension pot, in the form of tax relief. Some pension providers (including NEST) use a relief at source (RAS) arrangement, where they claim 20p tax relief back from HM Revenue and Customs (HMRC) for every 80p of the employee’s contribution received – no matter what the level of the employee’s earnings.
So, in the example of Marcie above, the amount she pays from her own wages (and the amount you therefore need to deduct) is 80p rather than £1.
Some pension providers do not use this method, and use a different approach to tax relief (net pay arrangements), meaning employees do not get any tax relief if their earnings are less than £11,500 (in 2017/18). This may be a relevant consideration in terms of choosing a pension provider if you have a lower-earning employee.
You should note that your employer contributions will not be a taxable benefit for the employee no matter which tax relief arrangement the pension scheme uses.
You can find more about the costs of auto enrolment, including set up costs on The Pensions Regulator’s website.
Your PA’s income may vary, but if at any point, they earn more than the eligibility threshold for their pay period, you should auto-enroll them at that time (or after three months if you have decided to postpone them).
Once they have been enrolled, and assuming they do not opt out, you will then calculate pension contributions each time they are paid, in accordance with the percentage table. You should remember that the percentages only apply to qualifying earnings over £5,876 (or the appropriate amount for their pay period). If their income fluctuates, this may mean that in some pay periods they could earn enough for there to be pension contributions, and in other pay periods they will fall short and there will be none.
Once your staging date has passed, you must tell The Pensions Regulator that you have complied with auto-enrolment and give them certain details, for example which pension scheme you used and the number of eligible jobholders automatically enrolled. You need to submit the declaration on The Pensions Regulator’s website within five months of your staging date (even where you used ‘postponement’).
Failure to comply with your employer duties could mean that you incur fines. It is your legal duty to make sure that the declaration is completed on time even if you have no staff to put into a pension scheme.
If you have realised you are late meeting your duties, or are struggling with them, you should tell The Pensions Regulator straight away. They will help you get back on track. Where necessary, you will need to work towards putting your staff back in the position they would have been if you had complied on time. You can find out what you need to do to put it right on The Pensions Regulator’s website. We understand that, in many cases, provided you work with the Pensions Regulator to put things right, you will avoid a fine.
If you don’t comply with auto enrolment at all, you can expect a penalty.
There is a penalty defence of ‘reasonable excuse’ in auto enrolment, meaning that something unexpected has occurred outside your control that has stopped you meeting your duties. However reasons given for non-compliance such as illness, being short-staffed, finding things too complicated, or confusion between employers and their advisers are not a 'reasonable excuse' as set out in a press release from The Pensions Regulator.
Please note that a reasonable excuse for HMRC’s tax duties and auto enrolment duties are separate. Where reasonable excuse might be accepted for tax purposes, it does not mean that it will be accepted for auto enrolment purposes.
What you need to do when a worker leaves your employment will depend on the particular rules of the pension scheme you have chosen so you will need to let the scheme know. They will probably write to the worker to confirm that they will not be receiving any more contributions from you but they can continue to make their own payments into their pot if they choose.
If you file your payroll information online, you should check to see if your payroll software is designed to carry out any auto enrolment tasks to help you meet your auto enrolment duties. If it does not then you may want to consider updating or changing it.
Auto enrolment functionality has been integrated into most of the HMRC approved payroll software packages (including some of the free software) and can make assessing workers, issuing communications, making contributions, viewing reports and submitting information to the pension provider much simpler and easier for you.
If you are a paper filer or use HMRC's Basic PAYE Tools (which is not designed to carry out any auto enrolment tasks), you will need your own process to assess your PA and calculate contributions. The Pensions Regulator have designed a ‘basic assessment tool’ (in the form of a spreadsheet) to help you with this, however, as its name suggests, it is very basic. Additionally, you will still need to do things like find out from your pension provider how to provide this information to them and feed some data from the spreadsheet on employee contributions back into your ordinary payroll calculations (in order that tax relief can be given, as necessary). For more information, go to The Pensions Regulator website.
Employers have a legal requirement to ensure that certain records are kept on both staff and on the pension scheme, for example the names and addresses of staff they have enrolled, records of when contributions were paid into a pension scheme and staff opt-in and opt out notices. These records must usually be kept for 6 years and can be held electronically or in paper format. You will need to ensure you have a good procedure for keeping these records as The Pensions Regulator could ask for them at any time.
Whilst an employee’s pension contributions attract tax relief, they do not ordinarily attract National Insurance contribution (NIC) relief. However, if an employer makes a contribution to an employee’s pension scheme, then there are no tax or NICs to pay. Because of this, a salary sacrifice arrangement is commonly used when it comes to putting money into a pension.
A salary sacrifice happens when an employee gives up the right to part of the cash remuneration due under his or her contract of employment. The sacrifice is achieved by varying the employee's terms and conditions of employment relating to remuneration. For example, an employee's current contract provides for cash remuneration of £15,000 a year with no benefits. If the employee puts £500 of this into a pension, then tax will only be due on £14,500 but NIC will still be due on the £15,000. Under salary sacrifice, the employee agrees with the employer that for the future the employee will be paid cash remuneration of £14,500 year and that the employer will put the £500 into a pension, tax and NIC free, for the employee. This means that the employee’s tax and NIC will only be charged on £14,500. The employer does not have to pay the 13.8% employers NIC on the £500 cash given up either.
Some employers enrol employees into a workplace pension scheme in combination with salary sacrifice arrangements. Essentially the employee ‘gives up’ their right to some salary and the employer would make all of the required pension contributions in return – making sure that the minimum total contribution is achieved – see above for more on this.
This type of arrangement can be quite complicated to set up (so you will probably need some professional advice) and may not be suitable in all cases (for example, those on the minimum wage cannot sacrifice salary), however, when appropriate, it can help reduce some of the extra costs that employers will face due to auto-enrolment. A starting point to find out more is to look at the information on GOV.UK.
Your PA may come to you for some guidance on auto enrolment – for example, should they stay in or opt out?
For many workers, saving into a pension scheme is a good idea but things may not be so clear cut if your PA is on a limited budget and/or if they do not get tax relief on their contribution, for example.
The Money Advice Service has some information for workers which you could direct your PA to.
The Pensions Advisory Service has a useful auto enrolment guide, including some frequently asked questions, on their website.
Our LITRG website has a section on auto enrolment for employees and a useful factsheet.
For employers new to this, there is some basic guidance on the GOV.UK website.
The Pensions Regulator’s website has a wealth of information that is designed to to meet the needs of employers who may not have pensions experience including those with just one or two staff. It uses everyday language, is interactive and contains videos and graphics so that employers can easily understand what they will need to do.
They also have specific help about automatic enrolment for people who employ their own care and support which includes the following resources:
- The essential guide for people who employ their own care and support (PDF, 96kb, 6 pages)
- Questions and answers for people who employ carers
The Pensions Regulator also has a useful FAQ’s section. There are also detailed help guides on various subjects, including Employer duties and defining the workforce, Postponement, Opting out, Re-enrolment, and Record Keeping on their website. If you still have questions, you can contact them by email or telephone on 0345 600 1011.
Disability Rights UK have a factsheet on auto-enrolment which you may find useful: Individual Employers and Workplace Pension Schemes for Personal Assistants.