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6th March 2018

Are you ready for Auto Enrolment Changes?

Beginning in April, the contribution minimum is changing for auto-enrolment. The new minimum is increasing as of 6 April 2018 to 5% - employers must now contribute 2%, and employees must contribute 3%. The numbers will go up again starting 6 April 2019, with the minimum for employers moving to 3% and employees to 5% for a total of 8%. What does this mean for employers and payroll providers?

Any employers with current auto enrolment pension schemes with contributor rates below the minimum must apply the new rates effective 6 April. If they fail to comply with the new regulations, the pension scheme will no longer be considered a qualifying scheme for their existing members, and cannot be used for new auto enrolments as well. Employers must make changes now to ensure they are applying the correct rates to their minimum contribution levels. Currently, employer minimum is 1%, so to remain compliant they must increase to 2% by 6 April.

You do not have to follow the new auto enrolment regulations if you use a defined benefit scheme, if you don't have any staff in a pension scheme for automatic enrolment, or if you are already paying above the minimum requirements. Employers are responsible for making sure they are following regulations, if their pension scheme is a qualifying one, and maintaining proper contribution deductions.

Payroll providers need to identify if the upcoming increase can be automatically built into existing systems to accommodate the changes. Due to the effective date of the rate changes, there could be overlaps in pay periods, so payroll providers must ensure they are correctly calculating the difference if the pay period overlaps with 6 April. If you are working with a payroll provider who cannot pro-rate contributions, you must determine how to calculate the correct amount beginning 6 April.

If you are an employer, ensuring your payroll provider is ready for the changes is vital to maintain your current qualifying pension scheme. Make sure they have the technology in place to manage the new contribution amounts and are prepared for the pay period that includes 6 April. If you are unsure if you will be compliant with the new regulations, or if your payroll is not meeting your requirements, talk to us – we can help! Click here to learn more online payroll solutions

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