Workplace Pensions or Auto Enrolment

As an employer you will have important duties to fulfil, including setting up a compliant scheme, informing your staff and assessing their eligibility each time you run your payroll.

Below we have outlined the three main stages you will have to go through to make sure you remain within the law.

The challenges of auto enrolment

If you employ even a single person then you will know about the new auto enrolment legislation that came into effect in October 2012 which requires anyone who employs even a single person to set up a pension scheme for their staff.

Getting ready for auto enrolment

Before your staging date

By now you will probably have received a letter from The Pensions Regulator, informing you of your staging date and providing you with a letter code.

You should receive your first letter from The Pensions Regulator about a year before your staging date, and a reminder about three months before.

Do not ignore this.

By the time your staging date arrives you should have in place a qualifying pension scheme and have informed all your staff that they will be assessed.


On your staging date

You will need to assess all your staff in the first payroll after your staging date to determine if they are going to be automatically enrolled into your new pension scheme.

Employees who are enrolled will have the right to opt-out. Employees who are not automatically enrolled will have the right to opt-in.

It is up to you to ensure that your staff know their rights and their options, and then you must act on them accordingly


After your staging date

Once you have completed your initial assessment you need to continue to assess your staff every time you run your payroll. This is not something that only happens once. You will have to do it every month and make sure the correct amounts are deducted from their salaries and paid into the pension scheme.

If you don’t keep up with your new duties as an employer you will be in breach of the legislation and could be fined by The Pensions Regulator, starting with a fixed penalty of £400 and daily increases beginning at £50 each day.

If you want to spend your time on your business call us on 020 8559 2111.

Preparing your pension scheme for auto enrolment

For us to help you set up a compliant auto enrolment pension scheme you will need to provide us with the following information:

  • You company details, including registered and trading address
  • Detail of the scheme point of contact
  • Essential business information, including your PAYE reference and Letter Code,. We will need your company number if you are a limited company.
  • How will you define the salary to be used to calculate the contributions
  • Will you enrol your staff as soon as possible, or postpone them
  • Will you postpone new employees who join after your staging date?
  • Will you match your staffs contributions if they choose to contribute more than the minimum?

All these questions and more are covered in our Auto Enrolment Questionnaire.

Exemptions for employers

The intention of the auto-enrolment legislation is to make sure employers in the UK provide a pension scheme to their staff, but although the legislation applies to almost every company, there are some exceptions.

The Pensions Regulator lists these exceptions on their website, but in brief the duties will not apply to you under the following circumstances:

  • You’re a sole director company, with no other staff
  • Your company has a number of directors, none of whom has an employment contract, with no other staff
  • Your company has a number of directors, only one of whom has an employment contract, with no other staff
  • Your company has ceased trading
  • Your company has gone into liquidation
  • Your company has been dissolved
  • You no longer employ people in your home (cleaners, nannies, personal care assistants, etc)

Assessing your staff for automatic enrolment

You must assess your staff every time you run your payroll. For many firms their staff will be on fixed annual salaries, making this a very straightforward process.

Some employees will be paid hourly, or on zero-hours contracts, or have bonus arrangements which mean it could be months or years before they are assessed to join the pension scheme automatically, so it is important assessments are performed regularly and accurately.

The assessment process will categorise your employees by age and earnings as either Eligible, Non-eligible or Entitled, according to the table below.

Eligible workers

Earn above £10,000 per annum and are aged between 22 and the State Pension Age (this will be based on your year of birth).

Non-eligible jobholders

Earn between £5,824 and £10,000 per annum, and are aged between 16-21 or State Pension Age-74.

Entitled workers

Earn less than £5,824 per annum and are aged between 16-74 years old.

Worker Assessments April 2016

These figures are correct as at April 2016 and will be reviewed annually.

  • Eligible jobholders will automatically join the scheme and have contributions deducted from their salary. They have the right to opt-out.
  • Non-eligible jobholders will have the right to opt-in.
  • Entitled workers have a right to join the scheme.

The assessment process can be handled automatically by either your payroll or your pension scheme. In our experience having the assessments performed by your payroll simplifies your duties. Your payroll should be able to produce a contribution summary. This summary can be given to your pension scheme and they can take over from there.

Some payroll systems can communicate directly with a pensions scheme which can reduce your involvement to no more than a couple of extra clicks. See our page on payroll for more information.

Complete our Auto Enrolment Questionnaire and we will tell you how easy this can be.

Contributions for employee auto enrolment pensions

When your new pension scheme has been set up and your staff have been assessed it is time to make the pension contributions.

In practice most firms have set up their auto enrolment pension schemes to require a contribution from the staff, but this is not strictly necessary, and the legislation allows for some flexibility here. As long as the total minimum contributions are paid, and the employer is paying their minimum contribution, it does not matter where the rest comes from.

Typically, though, in our experience most firms are making contributions in line with the following table from The Pensions Regulator.

Phasing period

Before 5 April 2018 

From 6 April 2018 to 5 April 2019

From 6 April 2019 onwards

Employer minimum contribution




Total minimum contribution

2% (including 1% employee contribution)

5% (including 3% employee contribution)

8% (including 5% employee contribution)

As you can see, although the minimum auto enrolment contributions begin at only 2% total (typically paid as 1% each from the employer and employee), these will increase over the next two years until they reach a combined figure of 8%.

Although your employer minimum contributions will triple, increasing to 3% in 2019, it is your employees who will face the sharpest increase as their contributions could rise from 1% to 8% of their salary.

How you want to handle this as the employer is up to you. You only need to make sure you are making the minimum contributions due.

Auto enrolment opt-ins, opt-outs, leavers and joiners

Once your assessment has been completed and staff categorised as eligible, non-eligible or entitled, you will have some employees ready to be automatically enrolled into your pension scheme, and some who are not.


Of course, not everyone who is enrolled wants to save into a pension, and some staff who are not included will want to join. You will also have other staff come and go over time so you need to be able to manage these individuals as easily as possible.

Opting out

All staff who are assessed to join your pension scheme automatically have the right to opt-out. Your duty as the employer is to deduct the correct contribution from their salary as soon as they have been assessed as eligible, but this money will not be paid to the pensions scheme immediately. Instead you will hold on to this money in case an employee chooses to opt-out.

If an employee opts-out they should have their contributions refunded the next time you run your payroll and they will not join the pension scheme.

Contributions are paid to the pension scheme before the employee opts-out can be refunded, but the employee must act quickly. Contributions made after this opt-out window has closed cannot be refunded, and will not be accessible by the employee until they retire.

This is another reason why you should encourage your staff to take an active involvement in their pension scheme. If they don’t want to join but put off their opt-out decision, they might not see that money in their pocket again until they retire.

Opting in

Staff who have been assessed as non-eligible have the right to opt-in to the scheme. They can do this at any time.

If an employee opts-in to the pension scheme the employer will have to deduct and apply the correct contributions from their salary, and the employer will also have to make their minimum contributions.


If an employee leaves your firm you will stop making contributions. The pension scheme should be informed of the member’s leaving date (usually this will happen autoamtically as part of your payroll process). The pension scheme should write to the employee to explain their options.

This is another reason why it is important to supply personal email addresses for your staff as far as possible. The pension scheme may ty to reach the staff member via the employer if they can’t reach the employee directly.

Note: If you have a staff member who wants to opt in but they have already opted in and left during the last 12 months the employer has the right to refuse to enrol them again.


An employee who decides to joins does not have to be put in to the auto enrolment pension scheme, and the employer is not obliged to contribute, but it should still be a good quality scheme.

Many employers will simply let these employees join the auto enrolment pension scheme, but you may have another pension scheme in place you prefer to use.

Auto enrolment and your payroll

Your payroll solution will be an integral part of your auto enrolment duties. With a range of pension providers and payroll suppliers working together there are dozens of possible options.

Ideally your payroll provider will be able to communite directly with your pension scheme. Some providers have one-click solutions in place which makes the process of assessment and contributions extremely simple.

Other combinations of payroll and pension may involve creating spreadsheets listing all the contributions (these can often be produced automatically) which are then uploaded to your pension scheme.

The payroll software you use may be able to do your staff assessments for you. (Sometimes there is an additional charge for this feature.) Generally we recommend taking advantage of this if possible as it can reduce the number of steps involved.

If you complete our Auto enrolment questionnaire we can tell you how well your payroll provider can integrate with a pension scheme.

Summary and next steps

There is a lot to stay on top of when you are aranging an auto enrolment pension scheme for your staff, but many of the issues you face can be handled automatically by payroll and your pensions scheme once you are up and running.

You need to make some decisions about the set-up of your scheme however, so let’s recap these:


  • How will you define the salary to be used for contributions?
  • Will you use the basic salary or qualifying earnings, or some other method?


  • What level of contributions will you pay?
  • Will you use the legal minimum or pay more?
  • Will you match any contributions your staff pay?
  • If so will this be capped or will you match 100% of employee contributions?


  • Do you need to postpone your staging date?
  • Will you automatically postpone new employees?

Remember, you must provide your staff with a pensions scheme but many of the important details of this scheme are up to you.

Our auto enrolment questionnaire will prompt you for this information and more.


Next steps

We can help you set up a pension scheme that complies with the legislation, and we can liaise with your payroll department or accountant to put in place an efficient process for assessments and contributions.

To do this we need some more information from you. You need to think about the details of the scheme you want to offer your staff (see a summary of the options you should consider here).

You may simply want to set up the most basic scheme you can just to comply with the law. We can help you with this too.

Our auto enrolment questionnaire gathers all the information we need to help you get your scheme set up. When we receive this we can contact you and take you through the rest of the process and gather any other information we might need depending on your answers.

You can also call us on 020 8559 2111 to see how we can help you fulfil your new obligations under the law, avoid paying any fines, and get back to doing what you do best.