Under the Pensions Act 2008, every employer in the UK must put their eligible staff into a workplace pension and pay into it.
Your client has legal duties from the moment they employ their first member of staff.
However long their company or organisation has been running for, when they take on their first worker, they have automatic enrolment duties that they must comply with straight away.
The duties apply from the new staff’s first day of employment - this is known as your client’s duties start date.
If your clients employ at least one person, that means they’re classed as an employer, and by law they have responsibilities that they need to act on.
Even if your client thinks they won’t need to put their staff into a pension scheme, they still have duties that they need to complete. Your client will need to continue to assess their staff to see if they meet the eligibility criteria for automatic enrolment, write to tell them how they’re affected, and complete a declaration of compliance.
Getting started
When someone is about to employ a worker for the first time, they need to take certain steps in preparation for taking on staff, such as determining whether they need to register as an employer with HMRC, or taking out liability insurance. Getting ready for automatic enrolment is just one of these steps.
Your client should be ready to comply with their legal duties as soon as their new member of staff begins employment, whether they have a PAYE scheme or not.
Make sure your client knows what they need to do to be ready when their duties start. We have help and guidance available according to the tasks your client needs to complete in order to comply with their duties.
You and your client can get started by by working out whether they have any staff who need to be put into a pension scheme.
If they do, they should tell us who should be their point of contact for automatic enrolment.
Checklist – what your clients need to do
You can perform the steps below on behalf of your client or offer them help and advice – but they remain responsible for the duties being completed. They could be fined if their duties aren't complied with correctly, or on time.
Actions your client must take
1. Work out who to put into a pension
Your client must assess their staff against the eligibility criteria on their duties start date and work out if any of them need to be put into a pension.
2. Choose a pension scheme
It must be suitable for automatic enrolment – you can help your client to find it. If their staff are eligible for automatic enrolment, both your client and the staff will pay into the pension. They should do this as soon as possible, as it may take some time.
3. Put eligible staff into a qualifying pension scheme
Your client must put any staff who meet the age and earnings criteria into a pension scheme that qualifies for automatic enrolment and pay contributions into it. Staff must be enrolled even if they’ve expressed a wish to opt-out – if they still wish to opt out, they can opt-out after they’ve been put into a pension.
4. Write to staff
Your clients must write to each member of staff explaining how automatic enrolment applies to them, including anyone not being put into a pension. They must do this no later than six weeks after their duties start date.
5. Declare compliance
Your client needs to go to autoenrol.tpr.gov.uk and declare how they’ve met their legal duties, even if they didn’t need to put any staff into a pension. All employers must do this – not having staff to enrol is not an acceptable reason for failing to submit a declaration. The declaration must be completed no later than five months after their duties start date.
6. Re-enrol staff that have left the pension scheme every three years
Every three years, your client must put any eligible staff that left or opted-out of their pension scheme back into it, on the anniversary of their duties start date. They must complete a new declaration of compliance to tell us how they’ve complied with their duties this time.
Video introduction to automatic enrolment for new employers
Watch our guide for business advisers
When a company becomes an employer for the first time, it has automatic enrolment duties from the day the first member of staff started working for them. Watch our video to find out what a business adviser needs to know if an employer asks for help with their automatic enrolment duties.
Staff eligibility for automatic enrolment
Not all staff will need to be automatically enrolled into a workplace pension, but your client must still assess them and determine their eligibility.
If your client's staff meet the eligibility criteria, they must be put into a pension:
- aged from 22 up to state pension age
- earnings before tax are at least £10,000 per year (or £833 per month, or £192 per week)
If staff don't meet the eligibility criteria, they don't need to be automatically enrolled in a pension unless they ask to be put into one – but your clients only have to pay into it if the staff earn more than £120 per week/£520 per month/£6,240 per year.
Not sure if your client is an employer?
If your client deducts income tax and National Insurance (NI) contributions from the earnings of their staff, then they're usually their employer.
If they used an agency to hire the staff, and the agency pays their NI contributions, then the agency is the employer and your clients don't need to do anything. You or your client should make sure to tell us that they're not an employer.
Director eligibility for automatic enrolment
Company directors are eligible for automatic enrolment in certain circumstances.
If a director has an employment contract, and at least one other member of staff – who can be another director – also has an employment contract, they all need to be assessed for automatic enrolment.
If your client only has directors on the books and doesn’t employ any other staff, whether the directors have automatic enrolment duties will depend on their roles and if they have employment contracts.
In some cases, directors may be exempt from automatic enrolment duties, even if they have an employment contract, as they're not classed as a member of staff.
Directors will have automatic enrolment duties if they have a contract of employment and at least one other person also has a contract of employment with the organisation.
If there's more than one director and no other staff - and at least two of the directors have employment contracts - all directors with employment contracts count as members of staff and are subject to automatic enrolment duties.
Seasonal and temporary workers - variable hours, contracts, and pay
If your client employs seasonal or temp staff, or they have staff whose hours and pay vary each time they pay them, they'll still need to assess them to work out if they need to be put into a pension scheme.
Your client can delay assessing their staff for up to three months – known as postponement – if they know their staff will only be with them for a short time.
Postponement doesn't change your client's duties start date, it only delays when they have to assess their staff. It can only be used once, and any staff that are assessed as being eligible for automatic enrolment after this time must be put into a pension scheme.
Opting out of an automatic enrolment pension
Some of your client's staff may not want to be in a pension scheme. This is fine – staying in a pension scheme isn't compulsory, and they can leave it any time after they've been put into one.
However, it is compulsory for eligible staff to be put into a pension to begin with. Your clients must first automatically enrol staff into a scheme before they can opt out of it.
Staff cannot tell your clients that they don't want to be in a pension and ask not to be automatically enrolled in the first place. Failure to enrol eligible staff is against your client’s legal duties – these staff must be put into a scheme, even if they don’t intend to stay in it.
Your client's staff can opt-out of an automatic enrolment scheme, and receive a full refund of their contributions, but only for a limited time. Opt-outs are possible for one calendar month, starting on the date active membership of the scheme began, or when the staff received the letter from your client with their enrolment information – whichever happens last.
Staff can still leave the scheme at any time, but after the one month opt-out period has finished, this is called ceasing active membership. In these cases, whether staff contributions are refunded will depend on the scheme rules.
Your client must never encourage or induce staff to opt out of or leave their scheme – this decision must be taken freely by the staff. Your client is not allowed to hand out forms for them to do this.
If your client’s staff want to opt out, the staff must request an opt-out notice from the scheme, which they should give to your client.
Late setting up a pension scheme
If your client missed their duties start date, they still need to work out what their automatic enrolment duties are, and may have to backdate pension contributions.
Your client must immediately comply with their legal duties, if they haven’t already done so, and can use our simple steps for new employers to find out what they need to do.
New employers without PAYE schemes
If your client doesn't have a PAYE scheme we'll write to let them know when they must complete their declaration of compliance by.
This could apply to your client if they're a new employer that hasn't set up a PAYE scheme yet, or if their staff have had a pay rise which puts them above the level of qualifying earnings for the first time.
We'll only write to your client once they've set up a PAYE scheme.
If your client is a new employer without a PAYE scheme and wants to complete their declaration of compliance before we write to them, they can contact us to arrange it.