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Pension Auto-enrolment – What you need to know!

From October this year employers will be under an obligation to enrol all “eligible job holders” onto a contributory pension scheme.

The scheme is being introduced incrementally, with staging dates applying to employers based on number of employees. The larger the employer the sooner the obligation applies, for example an employer with 120,000 employees has a staging date of October 2012 whereas an employer with 1250 employees has a staging date of September 2012. For useful guidance on when you as an employer will be effected, check The Pension Regulator’s website.

Employers should be careful not to fall into the trap of thinking these provisions only apply to ‘employees. The term introduced for this scheme is “eligible job holder” and guidance issued suggests this is intended to include both employees and workers, whether they work on a temporary or causal basis, as consultants or through an employment agency. Therefore the scope is much broader and employers should be mindful of this when preparing for implementation.

As a result a number of key issues emerge for employers to consider, including:

  • Do you need to change your existing arrangements? – If you currently have a company pension scheme you may need to check whether it meets the new requirements, for example in relation to employer contributions.
  • Do you offer a flexible benefits package? – If so, then you may need to review this to check it is legally compliant.
  • Do you need to change employment terms and conditions for your staff? If so, how do you do this? In many cases employers will need to seek employment law advice if they do not have an internal arrangement, to ensure this is done accurately and thoroughly.
  • And finally, are your systems fit for purpose? Record keeping is an important element of the auto-enrolment scheme and employers will also need to ensure their payroll facilities are suitable.

This acts only as a summary of the provisions and some implications to consider. The area can be quite complex and where you are in doubt professional advice should be sought.

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