Auto Enrolment is fundamentally related to your payroll because it is based on your employees salaries and age; and requires deductions to be made directly from their salary. It is therefore essential that you have, at an early stage, a payroll system in place that is appropriate to your business and can help you manage your AE obligations.
There are a number of possible ways your payroll is being run:
- You run your payroll manually or using HMRCâ€™s online system
- You run your payroll in-house using a payroll software package
- Your payroll is run by a third party, such as your accountant or a payroll bureau
If you run payroll manually or use HMRCâ€™s online payroll
While running your payroll manually is fine, especially for a small number of employees, adding auto enrolment into this may well prove complicated. It is worth talking to your accountant or a payroll software provider to see whether either of these options might be more suitable for you. It is important that you are clear about your AE responsibilities, both initially and ongoing; and the implications of the work involved if you continue to run your payroll manually.
If you run your own payroll using a payroll software package
If you are using a payroll software package, there are a number of key issues you need to address in order to implement auto enrolment. As part of implementing auto enrolment, you will need to upgrade your payroll software or choose a new payroll software provider. To do this, you will need to contact your supplier and obtain an upgrade that has the required AE functionality.
The minimum functionality the software needs to have for you to run auto enrolment is:
- Identify the type of worker based on date of birth and earnings â€“ employee assessment
- Specify the pension scheme
- Handle the different methods of tax relief
- Enrol the employee by linking them to the chosen pension scheme
- Allow for deductions to be made based on qualifying earnings and the three different types of certification that allow for deductions to be calculated in different ways.
- Produce deduction figures in the format required by the pension provider
- Allow for opt-ins, opt outs, joining and ceasing of active membership
- Maintain history â€“ record keeping
Ideally, the payroll software will also need to handle your employee correspondence. If it is handled by your payroll, all your information is in one place. However, pension providers usually provide the required correspondence as well and it might be more appropriate to get the pension company to deal with the letters.
You payroll provider should also allow you to carry out a test assessment of your employees so you know what type of employees you have.
If you use a third party to run your payroll.
You will need to contact whoever runs your payroll and find out how they will deal with auto enrolment. In most cases, this will be your accountant or a payroll bureau and you will need to discuss with them your options for auto enrolment. There are two things you need to determine: which pension scheme to use and whether the people running your payroll are on top of the process and have the necessary systems in place (such as payroll software), to effectively deal with auto enrolment for all of their clients.
Accounting and payroll firms use software that can run multiple companies. You will need to confirm with them that they have the necessary capability to competently process your auto enrolment as part of your payroll.
As far as the pension scheme is concerned, they may well have a default scheme that you can use or suggest you speak to a financial advisor (either one in their firm, affiliated with their firm, or an independent one they refer clients to). They may also suggest you find one yourself â€“ we discuss this in STEP 4. CHOOSING YOUR PENSION PROVIDER
Many of the tasks mentioned in this guide relate to things you have to do within payroll. Obviously, if you outsource your payroll, you will not have to deal with these directly, but it is important that you understand what needs to be done so that you can confirm with the people who run your payroll that these tasks have been addressed. Ultimately, the responsibility for ensuring compliance is yours.