If this is your first time hiring employees, you’ll want to ensure you start off on the right foot – and staff pensions are a big (and legal) priority from the minute you start hiring.
As an employer, you’ll need to open a ‘workplace pension’. Who qualifies for this, and how you auto-enrol them can be a bit complex – so we’ll explain everything you need to know as well as where you can get advice.
What is a workplace pension?
The UK government introduced workplace pensions to help employees save more money for their retirement, with contributions deducted from their wages each month.
The bonus of a workplace pension from an employee’s perspective is that you (the employer) also make contributions towards their pension pot. The current minimum rate for employer contributions is 3%, but you can choose to pay more.
Who needs to set up a workplace pension, and how?
As an employer, it’ll be up to you to provide a workplace pension scheme for eligible staff. You must do this as soon as your first member of staff starts working for you; this is referred to as the ‘duties start date.’
You can use The Pensions Regulator for employers to guide you on what you need to do and when, as well as doing your own research to find the best pension schemes for your employees – just remember to check with the provider that they meet the necessary requirements.
What is automatic enrolment and how does it work?
Automatic enrolment is when an employee who’s eligible is automatically made a member of a workplace pension, without asking to join. In previous years, employees would ask to be enrolled, but since 2012, employers were gradually required to enrol their eligible staff automatically.
Employees can currently access their workplace pension at 55, but this will change to 57 in early 2028. Workers can opt out at any time, but it’s always best to remind them they’ll be missing out on both their employers’ contributions, as well as any government contributions (via tax relief).
Which of my employees are eligible for auto enrolment?
Certain members of staff may not meet the eligibility criteria yet, for example, because they don’t work enough hours with you, or they’re under the age requirement.
The employees you must enrol are:
- Aged between 22 and the current State Pension age
- Earn £10,000 or more
- Work in the UK (or they’re based in the UK, but also travel abroad for work)
In lots of cases, you may find staff who don’t qualify at first eventually become eligible to be enrolled. For example, a part-time member of staff becomes full-time and earns over the threshold. When this happens, you must put them into your pension scheme, and write to them within 6 weeks of meeting the criteria.
How much do I pay towards my employees’ pension?
This varies depending on which work pension scheme you’ve chosen, but the legal minimum is 3% of your employee’s earnings.
| The minimum employers need to pay: | The minimum employees pay: | The total minimum pension contributions: |
| 3% | 5% | 8% |
If your employee decides to voluntarily opt-in, you must contribute the minimum amount towards their pension if they earn:
- £520 a month
- £120 per week
- Or £480 over 4 weeks
In some instances, if you pay in more, your employee can opt to pay less, as long as the total minimum contributions are at 8%.
Top tips for auto-enrolment
There are some steps you can take to help auto-enrolment go as smoothly as possible.
Check if you have eligible staff and know your staging date
You’ll need to assess exactly which of your employees meet the requirements to be auto enrolled, as well as your ‘staging date’. The Pensions Regulator should write to you and let you know when this is
If you need to know your staging date urgently, you can enter your PAYE reference into the Pensions Regulator’s Staging Date Calculator.
Make sure you have suitable payroll software
This shouldn’t be too hard as the majority of payroll software is compatible with automatic enrolment and should work out who you need to put into a pension scheme, how much will be deducted, as well as how much you need to pay your staff.
Choose the pension scheme you’d like to use
You can either look for a scheme yourself or get some help from an advisor. The Pensions Regulator is great for offering advice, as well as showing pension providers who are compliant.
You’ll need to provide a formal assessment on your staging date so you’re aware of how much you’ll be contributing each month. Remember the minimum contribution is 3% but you may have picked a scheme where you contribute more.
Some employees are entitled to employer contributions, and some are not:
| Aged between 22 and State Pension Age | Younger than 22 or above State Pension Age | |
| Entitled Worker |
|
This is the same as the ‘Entitled Worker’ in the category opposite. |
| Non-Eligible Jobholder |
|
|
| Eligible Jobholder |
|
Not applicable |
Can I switch workplace pensions?
If you find a better workplace pension for your staff then you can decide to make the move, but it’s important your employees are completely aware so they can ask questions before the switch.
Lots of pension providers send a welcome pack for your staff to take a look at, which can help you explain the reasons behind the change and avoid any anxiety!
Recording payments and deductions
It’s vital that your business records any payments and deductions in its bookkeeping. If you use bookkeeping software like Pandle for example, you can simply enter wage adjustments for any pension contributions that you make. You’ll need to ensure this type of data is correct to avoid any disputes.
Check out the Pensions Regulator for more guidance on record-keeping for workplace pensions.
Need help recording your employer pension contributions? Create your free Pandle account today and see how we can help you.
