If you own a small business and employ staff, it’s very likely your staff must legally be in a pension scheme. This requires you to set up a Workplace Pension Scheme which you must then contribute to. The contribution process is called ‘automatic enrollment’, and it’s essential to set this up as soon as possible. If you don’t, you may face serious legal repercussions.
Thankfully, it’s fairly easy to set up a Workplace Pension Scheme. You just need to know how to get started!
Here’s everything you need to know about the Workplace Pension Scheme in 2023.
Legal Obligations As A Small Business Owner
Staying up to date with current pension thresholds is part of your responsibility as a business owner. These duties begin as soon as you hire an employee who is eligible to receive a pension.
How Much To Contribute
Each contribution you make is calculated based on the employees gross annual earnings. The lowest bracket that can claim earns a minimum of £6,240 per year, while the highest bracket can earn up to £50,270.
When you’re calculating an employee’s earnings, don’t forget to include:
· General salary
· Bonuses they have received throughout the year
· Any overtime completed
· Any commission they have earned
· Sick pay
· Holiday pay
· Statutory payments for family leave (including maternity and paternity leave)
Qualifying Earnings In Detail
Employee eligibility is determined by three earning bands. These bands are called ‘qualifying earnings’, and they are determined by the government and reviewed every year. The earnings threshold for 2023;
· Lower earnings limit is £6,240 (which equals £520 per month).
· Automatic earnings limit is £10,000 (which equals £833 per month).
· Upper earnings limit is £50,270 (which equals £4,189 per month).
Tips For Setting Up A Pension Scheme: Enrolling Employees
Once you have set up a pension scheme, you’ll need to enroll any eligible staff members (look at their age and earnings to work this out). Any staff members over 22 and under state pension age are eligible to be included if they earn more than the lowest qualifying rate.
Declaring Compliance
You’ll have to to formally declare compliance with the Pensions Regulator and will need to do this within five months of setting up a pension scheme.
Contacting Employees
It’s important to contact each member of staff in writing to tell them how the automatic enrollment will affect their salary. This needs to be done by you within six weeks of them enrolling in the Pension scheme.
Making Employee Contributions
You must also make weekly or monthly (depending on when you pay your staff) contributions into the pension scheme.
Managing Pension Scheme Requests
Finally, you’ll need to manage pension scheme requests from employees. This includes all employees over 16 and under state pension age who earn the lowest qualifying level and up. Once you’ve received a request from your employees, you will have one month to enroll them (so don’t wait too long!).
Employees can also request to opt out of the scheme within the first month of their enrollment. If this happens, you’ll need to stop deducting the pension contributions. any contributions that have been made will also need to be refunded by you.
How Can I Afford To Pay For Pension Advice?
A money advice service can seem like a big expense, but there are actually lots of affordable options for small business owners. This means that you can get the advice you need, no matter your personal circumstances.
Contact Us To Find Out More
Do you feel overwhelmed by the idea of running a monthly pension scheme? If so, we can help. Our team of highly trained virtual assistants can help with the admin side of things, so you can focus on the day to day running of your business. Click here to find out more about our services.
