The Do's and Dont's of Offering Auto Enrolment as a Service
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This is what you must be offering as a chargeable service (and clients should pay for it). Finding the right pricing strategy will be a key factor to increasing profits. If the price is set too high, clients may go elsewhere. If the price is set too low, the opportunity to increase revenue may be missed. Fundamentally, the price a bureau charges will need to cover any additional investment in software and additional hours involved in processing AE. With 750,000 employers to stage in 2017, the opportunity is there to survive and remain profitable. We will also look at whether there are other value added considerations you should be bringing to your clients attention. Auto Enrolment Overview Auto Enrolment as a Service Pricing Auto Enrolment Services Tiered Pricing Strategy Monthly Retainer Fee Price List Approach Choosing the Right Tools for AE How can BrightPay Help? The impact of AE on your clients contracts of employment
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The Do's and Dont's of Offering Auto Enrolment as a Service
- 1. The webinar will begin shortly... The Dos & Don'ts of Offering Auto Enrolment Services By Rachel Hynes
- 2. By Rachel Hynes The Dos & Don'ts of Offering Auto Enrolment Services
- 3. By Laura Murphy The impact of AE on your clients contracts of employment
- 4. Q&A Session Questions Tab or #BPWebinars On Demand This session is being recorded REC Q&A
- 5. Webinar Agenda Auto Enrolment Overview Auto Enrolment as a Service Pricing Auto Enrolment Services Tiered Pricing Strategy Monthly Retainer Fee Price List Approach Choosing the Right Tools for AE How BrightPay can help? Impact on Contracts of Employment
- 7. Entitled Workers Non Eligible Jobholders Eligible Jobholders Auto Enrolment Overview
- 8. Eligible Jobholders • Aged between 22 and State Pension age • Earn more that £10,000 per year • Work, or ordinarily work, in the UK Auto Enrolment Overview
- 9. • Set up a pension scheme with a qualifying workplace pension provider • No eligible jobholders? No need to set up a pension scheme • If an employee chooses to opt in or join, a scheme must then be set up Auto Enrolment Overview
- 10. • At staging employers must assess all employees • If an employee is an eligible jobholder they must be enrolled into a workplace pension scheme Auto Enrolment Overview
- 11. • ALL employees must receive communications within six weeks • Employees must be notified of auto enrolment and how it affects them • Postponed employees must also receive communications within six weeks Auto Enrolment Overview
- 12. • Ongoing duties: Handling opt-outs and refunds Managing opt-in and joining requests Making deductions and contributions Monitoring employees each pay period Sending contributions to the pension provider Auto Enrolment Overview
- 13. • Employers must complete a declaration of compliance • Must be completed within 5 months of staging date • Notifies TPR that you have complied with AE Auto Enrolment Overview
- 14. Auto Enrolment as a Service
- 15. Auto Enrolment as a Service Employers with less than 50 employees of an accountants client base is made up of: 90%
- 16. • Are you ready or prepared to take on auto enrolment business? • What level of support / information will you offer? • Are you prepared for employers coming to you last minute? Auto Enrolment as a Service
- 17. • Offer a complete end to end solution • Bureaus can generate income and enhance client relationships • A new platform to reach and upsell to • Employers will be happier to consolidate all their outsourced services to one person or advisor Auto Enrolment as a Service
- 18. Value Proposition for your Clients 1. Time saving 2. Cost saving 3. Focus on core areas 4. Expertise
- 19. Pricing Auto Enrolment Services
- 20. Pricing Auto Enrolment Services • Auto enrolment as a chargeable service – clients should expect to pay more • Finding the right price is key to increasing profits – Price set too high: clients may go elsewhere – Price set too low: may miss opportunity to increase profits • Price must cover any additional investment in software and additional time carrying out payroll
- 21. Pricing Auto Enrolment Services • Prices vary dramatically across the market • Dependent on the no. of employees and the level of AE services • Offer a free AE consultation with clients • Explain the various administrative aspects of AE
- 22. Pricing Auto Enrolment Services • The three main advantages: 1) Understand how much is involved in AE 2) Much more receptive to your fee quotation 3) Eliminate your clients seeking AE advice from you for free
- 23. Pricing Auto Enrolment Services Tiered Pricing Structure Monthly Retainer Fee Price List Strategy
- 25. 1. Tiered Pricing Strategy “A tiered strategy is where a bureau can provide AE services at different price points for different levels of service” • For example, shipping costs when purchasing online • Clearly outlines the value and price differences between different levels of service • Allows clients to choose a price point that suits their budget
- 26. • Employee Assessment • Enrolling Employees Tier 1 • AE Communications Tier 2 • Processing opt ins/outs Tier 4 • Postponement • Declaration of Compliance • Ongoing AE duties Tier 3 How to charge for AE services?
- 28. 2. Monthly Retainer Fee “A monthly retainer fee is an agreed amount to be paid on a monthly basis for completion of an agreed set of tasks” • Increase a clients monthly charge for processing their clients payroll and auto enrolment • Spreads the cost of auto enrolment over a period of time, rather than a large fee initially • A simple way to include ongoing AE duties • Consistent & predictable revenue stream each month
- 29. 2. Monthly Retainer Fee “A monthly retainer fee is an agreed amount to be paid on a monthly basis for completion of an agreed set of tasks” • Appeals to clients as it guarantees the bureau will carry out specific AE task each month • Understand what payroll and auto enrolment will cost, allowing them to plan accordingly • Ongoing duties should be automated with minimal time required
- 31. 3. Price List Strategy “A price list is a simple way to present a list of services – breaks down each AE process into bite-sized pieces for your clients.” • Some bureaus may decide to only handle some auto enrolment tasks • Demonstrates exactly what is being offered as a chargeable service • Cost itemisation: justifies the price charged for AE
- 32. 3. Price List Strategy “A price list is a simple way to present a list of services – breaks down each AE process into bite-sized pieces for your clients.” • Option to offer bundle deals • Allows clients to measure progress of the project • Breaks down each element, helping to organise and define the total work scope of the project • Simplify the clients understanding of the AE services offered
- 33. Pricing Auto Enrolment Services • A clear pricing structure will allow any bureau to cost and schedule auto enrolment duties for each client • Bureaus can establish clarity while effectively increasing profits • Client can decide which of the tasks they want to outsource / process in-house
- 34. Pricing Auto Enrolment Services • Bureaus can increase revenue by offering AE as a chargeable service • Avoid increasing own business costs – additional software charges will reduce any profits • Auto enrolment is a function that should be included in the cost of payroll software. • Ensure software will streamline AE tasks allowing bureaus to maximise profits
- 35. Choosing the Right Tools for AE
- 36. Choosing the Right AE Tools • Some software providers can automate auto enrolment for you • Look for a solution that offers auto enrolment automation at no extra cost • TPR advises that an integrated payroll and auto enrolment solution with make life easier
- 37. Pension Scheme Selection • It’s the employer’s responsibility to choose a pension scheme • Each pension provider requires information from the payroll software in a specific format • BrightPay currently supports 17 pension providers
- 38. Application Program Interface • API – payroll and pension integration • Direct integration allows users to send pension data with just one click • Other NEST APIs – Validate set up details and approve payments • API’s improve AE compliance and reduce workload & errors
- 39. Enrolling Employees • All eligible jobholders must be automatically enrolled into a pension scheme – Eligible jobholders have the option to opt out – Non-eligible jobholders have the option to opt in – Entitled workers have the option to join • Some software providers offer batch processing which further reduces the workload
- 40. Deductions and Contributions • Employer must make pension deductions and contribute to the scheme • Managing this manually can be difficult
- 41. Communications • Must communicate with all workers to tell them how AE applies to them • Must be done in writing within 6 weeks of the staging date • Payroll software should be able to produce the communications for you
- 42. Postponement • Employer have the option to postpone AE for up to 3 months • Re-assess employees after postponement period has ended • Postponement is streamlined with some payroll systems
- 43. How can BrightPay help?
- 44. Impact on Contracts of Employment
- 45. What’s the issue • “The Company operates a stakeholder scheme, which you are eligible to join. Full details are available from the HR Department.” (Common standard pension clause)
- 46. What to include • Amend contract clause – stating compliance with auto enrolment • Issue a letter varying pension clause
- 48. Bureau Licence: £199 + VAT per year Employment Contracts & Staff Handbooks
- 49. Bureau Licence: £229 + VAT per tax year Payroll and Auto Enrolment Software
- 50. Questions & Answers For more information visit www.brightpay.co.uk, email sales@brightpay.co.uk or phone 0845 3004 304
Editor's Notes
- Hi Everyone and than you for joining us for today’s webinar…
- My name is Rachel Hynes and I work in marketing here at BrightPay for the past 3 years. Today I will be discussing the do’s and don’ts of offering auto enrolment as a chargeable service to your clients.
- Today’s webinar is also in conjunction with our sister company, Bright Contracts. Our employment law expert, Laura Murphy, will be joining us later on behalf of Bright Contracts. Laura will have a quick look at the impact that auto enrolment will have on contracts of employment in the workplace.
- You are more than welcome to ask questions throughout the webinar. Feel free to type them into the question bar on your control panel. We will have a few minutes for questions and answers at the end of the webinar and we will get through as many questions as possible. Click Today’s webinar is being recorded, and we will send an email to all attendees later on today with a link to the recording and a copy of the slides.
- So, here is the agenda for my slot today, and as you can see we have a lot to get through. I’m going to start off first with a quick recap of AE, followed by some tips for developing your auto enrolment pricing strategy. We will then have a look at three different pricing strategies that can be used, and some key factors to consider when choosing the best auto enrolment tools for your bureau.
- So I assume most of you have an understanding of auto enrolment but just a quick recap before we have a look at the pricing… Auto Enrolment is about the legal requirement of employers to enrol their employees into a workplace pension scheme.
- What auto enrolment actually means for an employer is that, from the staging date, all eligible jobholders must be automatically enrolled into a pension scheme and the employer must make contributions to their pension pot. All employees must be assessed to determine whether they are eligible jobholders, non eligible jobholders or entitled workers.
- Eligible jobholders are those who: are aged between 22 and State pension age, earn above the earnings threshold (currently ten thousand pounds) and work in the UK. Eligible jobholders have the option to opt out after being enrolled. All other employees are either non eligible jobholders or entitled workers and they can choose to opt in or join the workplace pension scheme. Basically auto enrolment is something that is optional for the employee but mandatory for the employer.
- A pension scheme must be set up with a qualifying pension provider and this should be done in advance of your staging date. This should not require a great deal of time to complete. Just to note, if you have no eligible jobholders, you don’t need to setup a pension scheme. However if any employees choose to opt in or join, then a pension scheme must be set up.
- Next, the workforce must be assessed and all eligible jobholders must be automatically enrolled into a workplace pension scheme, unless postponement is being used.
- All employees must receive communications within 6 weeks of the staging date, not just those who hove been enrolled. You must notify eligible jobholders, non eligible jobholders, and entitled workers of auto enrolment and how it will affect them. Apparently, some employers believe that if they choose to postpone all employees for 3 months at their staging date, then nothing needs to be done in that 3 month period. This is not the case as all employees must receive a postponement communication within 6 weeks of the staging date. This must state that they have been postponed and explain when they will be re-assessed. If this communication is not issued then the postponement effectively never happened and enrolment must be completed retrospectively back to the staging date, which will in itself be a nightmare.
- There are also a number of ongoing employer responsibilities such as handling opt outs (and opt ins), making deductions and contributions, monitoring employees each pay period, and sending a contribution file to the pension provider.
- You must also complete a Declaration of Compliance within 5 months of the staging date. This notifies the Pensions Regulator that you have complied with AE.
- Payroll bureaus need to decide if they are prepared to offer auto enrolment as a service to clients
- It is estimated that 90% of an accountant’s client base is made up of employers with less than 50 employees – and it is from now onwards that these employers will be affected by auto enrolment.
- With many shying away from offering this as an extra service, bureaus will need to determine what kind of information and support they will offer to help their clients comply with these new AE duties. Advisors will find that a large portion of employers will contact them very close to or even after their staging date. If this is within 6 weeks, make sure to issue a postponement letter immediately, otherwise you will need to backdate AE.
- By offering a complete end to end solution, bureaus can generate income and enhance client relationships. If bureaus offer other services such as bookkeeping, tax returns, audits, management accounts, etc. they will have a new platform to reach and upsell to this new audience. You will find that employers will be happier to consolidate all their outsourcing services to one person or advisor.
- There are a number of benefits for your clients who outsource to you for auto enrolment: Time - There will be significant time savings for your payroll clients. By outsourcing AE to a payroll professional, your client can avoid investing huge amounts of time researching how to comply with AE. The implementation of AE could also be very time consuming if your client doesn’t have the correct technology or software in place to automate a lot of the AE admin tasks. Cost - Time is money as the saying goes. Without your help your payroll clients might choose payroll software that doesn’t have AE functionality. Even if it does some payroll providers are charging an additional charge for AE functionality and a further charge to support your clients through the process. With a bureau your client can avoid costly mistakes and save time that otherwise would have been taken out of their normal working week. Focus on Core Areas - Especially for small and micro employers their time is extremely precious. Time away from their business is money. Outsourcing AE to a payroll professional frees up their energies and enables them to focus on the core areas of running their business. Expertise - Implementing AE may require skills that staff do not possess. Outsourcing will provide a level of continuity to the company while reducing the risk of possible non compliance.
- If you do decide to offer auto enrolment services to clients, the price that you set to process auto enrolment will be an important business decision.
- Unlike the introduction of RTI, bureaus now find themselves in a situation where they can financially benefit from auto enrolment by offering it as a chargeable service to their clients. With the added workload required to process AE, it is inevitable that clients should expect to pay more for the extra work provided. Finding the right pricing strategy will be a key factor to increasing profits. If the price is set too high, clients may go elsewhere. If the price is set too low, the opportunity to increase revenue may be missed. Fundamentally, the price a bureau charges will need to cover any additional investment in software and additional hours involved in processing the payroll.
- The dilemma of how much to charge your payroll clients for the additional AE work is fast becoming a hot topic! There seems to be a certain degree of secrecy surrounding pricing AE services as nobody is quite sure how to charge. The prices that accountants and bureaus are charging vary dramatically across the market. It is very much dependent on the number of employees the employer has and the level of AE services the employer wishes to be carried out. One way of introducing auto enrolment as a service is to offer a free AE consultation with clients. This consultation allows you to explain the various administrative aspects of AE along with your pricing structure to your existing clients and potentially gain new clients.
- The three main advantages of this consultation approach are: - The client will begin to understand how much is involved in AE - The client will be much more receptive to your fee quotation - The consultation approach will hopefully eliminate your clients seeking AE advice from you for free
- The most important factor in setting the pricing strategy is to make sure that it allows the bureau to be profitable. While there is no magical formula to achieve this, we are now going to examine three unique pricing strategies that are both practical and realistic. The first approach we will examine is a tiered pricing structure, next we will discuss using a monthly retainer fee, and finally we will look at a price list strategy.
- So first is a tiered pricing strategy –
- a tiered strategy is where a bureau can provide AE services at different price points for different levels of service. A very simple example of a tiered structure would be shipping costs where a customer has the option to pay for items to be delivered in 1-2 days, 5-7 days or 7-14 days at different price points. The tiered strategy method clearly outlines the value and price differences between different levels of service, so it can make sense to both the bureau and their clients. This strategy means that clients can find a price point that will suit their budget.
- Here is an example of a tiered pricing strategy for a client that has 10 employees. This clearly outlines different packages that the client can choose from, including bronze, silver, gold and platinum. A good tiered strategy needs a structure that ensures no tier is too heavy or too light on the service offerings. If the option to upgrade is simple and straightforward, clients will be more inclined to upgrade. These prices are in addition to normal payroll charges. This example is not definitive and is open to amendment – it is also possible to create various tiered packages with different price points depending on the number of employees your client has and whether there are different pay frequencies. By introducing a tiered pricing system, this will enable the employer to decide how much of the auto enrolment process they want to do themselves. If you are already doing their payroll for them, it is unlikely that they will want any part of the AE process and will prefer to leave it all to you.
- Next up is a monthly retainer fee
- , which is an agreed amount to be paid on a monthly basis for completion of an agreed set of tasks. Typically, it is a contract for which the client will pay for the required AE services. Some bureaus have decided to simply increase the monthly charge for processing their payroll plus auto enrolment. Rather than charging a high price for auto enrolment setup initially, a monthly payment will spread the cost of auto enrolment over a period of time. By charging per month, a bureau can also include the continuing AE tasks, such as the ongoing employee assessment each pay period and submission of files to the pension provider. A retainer approach is an opportunity to calculate how much revenue will be made from a particular client each month, allowing for a consistent revenue stream. This pricing strategy will allow for an incremental increase in income as each client reaches their staging date.
- This pricing structure will appeal to clients as it guarantees that the bureau will carry out specific AE tasks on their behalf each month in a manageable way. The client will understand from the outset what the payroll and AE costs will be, permitting them to budget accordingly. The time associated with ongoing AE tasks should be minimal each month due to software automation of AE duties. The processing time will be further reduced with the introduction of integrated or API services between payroll and pension providers.
- Finally, bureaus could use a price list strategy.
- A price list or menu is a simple way to present a list of services. It is another way to break down each AE process into bite-sized pieces for your clients. Some bureaus may decide that they only want to handle the AE tasks that are seamlessly handled by their payroll software. A price list approach will demonstrate exactly what the bureau is offering as a chargeable service. Cost itemisation is useful in justifying the price charged for AE. If clients see that an activity-based costing structure is being used, they can begin to understand each component of the process. It will be important to complete some price comparisons and establish the reasons for the variation in prices for different services.
- With this strategy, there is also an option to offer bundle deals, for example if the client buys more than five tasks or services. A lot of phone and broadband companies use this quite effectively to promote their TV, broadband and phone services. For the client, the advantage of a price list structure allows them to measure progress of the project. Clients will have a better understanding of the cost and resources required to comply with AE. This method works by breaking down each element of AE in a way that helps organise and define the total work scope of the project. Listing each of the automatic enrolment tasks on a price list will simplify the client's understanding of the AE services offered and make it easier for them to make their selections.
- A clear pricing structure will allow any bureau to accurately cost and schedule the work involved for each client. The advantages of each of these different pricing strategies will ultimately put the control into the hands of the clients. The client can then decide which of the tasks they want to outsource and which of the tasks that they would like to process themselves. By explaining AE costs as a quantifiable structure, clients can then begin to understand the complexities of the duties involved in AE. All of the work can be clearly planned and identified at a set price as agreed by both parties.
- The objective for payroll bureaus is undoubtedly to increase revenue from auto enrolment. Bureaus need to avoid increasing their own business costs or overheads to prevent operational losses. Should additional software charges be incurred for AE functionality, any increase in price will reduce any profit. AE is only representing an opportunity for bureaus when there are no additional operational costs for AE automation. Payroll software should seamlessly handle all AE tasks, regardless of how many employees the client has. Auto enrolment is a function that should be included in the cost of payroll software. Additionally, ensure that the software streamlines all AE tasks – reducing the workload, thus allowing bureaus to maximise profits.
- Now we will have a look at choosing the right tools for auto enrolment which is a fundamental part of making the process easier for you.
- The process of choosing the right payroll provider has obviously been made more complicated with the new AE employer duties. Some software providers have decided to avoid auto enrolment completely, others are offering AE features with limited functionality and some are even charging an additional fee for an AE module or AE add on per employee, per month for AE functionality. However, there are good solutions on the market, such as BrightPay that can automate AE for you at no additional charge. Whatever solution you choose it will be important to make sure that AE is really automated within the payroll software.
- Pension scheme selection - First of all - It is the employer’s responsibility to choose a pension scheme for their workers. Make sure to find out what pension providers are supported by your chosen payroll software. Some software packages only cater for one or two pension providers, limiting the range of pension options for you. Each pension provider does require information from the payroll software in a specific format. Obviously it will be more time consuming if you are creating these files manually or if the pension data export is unsupported by the payroll software. Just to note BP supports 17 different pension providers.
- Some Pension providers have released an API integration tool which allows for direct communication between payroll software and the pension provider. API stands for Application Program Interface, which is a similar process to RTI where you can submit your data files directly from the payroll software itself. It is basically a direct integration or link between the payroll and pension scheme which allows both systems to directly talk or communicate with each other. For example in BrightPay the NEST API integration allows users to send their pension data through to NEST with just one click. This is compared with exporting your pension file, saving it, opening up the pension providers portal and uploading the pension data. So you can imagine this will save you significant time. BrightPay also have a two other API’s for NEST - One allows you to process and approve payments from within BrightPay and the second allows you to check that all of your details that you have set up NEST match exactly with what you have set up in your payroll. Most people who have issues with NEST are caused from information not matching up exactly with both payroll and NEST. Information needs to match exactly even when it comes down to upper and lower case letters and any spaces. All three of these API facilities will make auto enrolment compliance more straightforward and remove the necessity to manually log on to the NEST web portal to submit payroll data, process payments and check that details are matching. If NNEST is being used by your clients, it will be important to check with your current payroll provider to see if they offer these 3 nest API functions so that you can work much more efficiently.
- Enrolling Employees – All eligible jobholders must be automatically enrolled into a pension scheme. Be aware, eligible jobholders will have the option to opt-out of a pension scheme within 1 month of being enrolled. Equally, employees who are non-eligible, will have the option to opt-in to the pension scheme. Entitled workers can also ask to join the pension scheme. Your Payroll software should be capable of making this entire process straightforward by allowing you to enrol eligible employees into the pension scheme. Payroll software should allow you to easily process opt-in, opt-out and join requests. If an employee opts out, your payroll software should be able to automatically refund any deductions already made by the employee and show this refund on their payslip. In addition, your software should allow batch enrolment of multiple employees, reducing the workload even further. With good payroll software, it just takes a few clicks to enrol all eligible employees into the pension scheme at the same time.
- Deductions and Contributions – You must administer the deduction of pension amounts from an employee and employers must also contribute to the pension pot. It is important to make the correct deductions and contributions each pay period and to include this information on employee payslips. Managing deductions and contributions manually can be difficult, especially when employees are on different pay rates or different pay amounts each pay period. Check to see if your payroll software has the ability to process relevant deductions and contributions automatically for employees each pay period.
- Communications – Communicating with employees is a mandatory part of auto enrolment. Within six weeks of the staging date, employers must write to all employees. Each letter should outline how auto enrolment applies to the employee and provide information about their rights. It is important to ensure that each employee receives the correct communication based on their individual worker category, that being either eligible, non-eligible or an entitled worker. There are different variations of these AE letters, depending on which worker category the employee falls into. There are letter templates available on The Pensions Regulator’s website which can be manually edited for each employee but this is quite time consuming. Communication duties will be simplified if letters can be automatically produced by your payroll. In your payroll you should be able to automatically produce personalised auto enrolment letters, based on the employee's worker category, ready for printing, downloading or emailing. An option to batch print or email these letters would also be beneficial. Again some payroll providers are charging extra for this AE communication functionality. With BrightPay you can send letters to hundreds of employees in a couple of seconds.
- Postponement Employers have the option to postpone auto enrolment for up to three months for some or all employees. If an employer uses postponement, a letter must be provided informing employees that AE has been postponed, the deferral date and that they have the option to opt-in to the pension scheme before this date. On the last day of the postponement period, each of the postponed employees must be assessed again to determine their AE worker category. The option to postpone should be built into your payroll and include assessment alerts when the postponement period has expired. Obviously, it will save time if postponement communications are automated within the payroll software compared to manually producing these letters.
- So now I am going to give you a very quick look at just how easy auto enrolment can be with BrightPay.
- The final topic that we are going to have a look at today is the impact that auto enrolment has on employment contracts in the workplace. So I will now pass you over to Laura for a couple of minutes who is here on behalf of Bright Contracts. Thank you Rachel. I want to briefly look at another impact that auto enrolment can have on workplaces. That is the impact on employment contracts. As a bureau offering AE as part of your payroll offering, having a little awareness of the impact auto enrolment can have on employee’s contracts can be a useful value-added consideration that you can bring to your clients attention.
- In the flurry (possible panic) to comply with auto enrolment duties the contract is often the last thing employers will think about. It is advisable however, that employers check their contracts of employment as part of their enrolling process. Where pension schemes are already in operation, standard employment contracts often make a generic statement about eligibility to join a pension scheme. For example: “The Company operates a stakeholder scheme, which you are eligible to join. Full details are available from the HR department”. Post auto-enrolment, a generic statement such as the above example will no longer be sufficient. Eligible jobholders will, of course, have to be automatically enrolled into a pension scheme, although they will have the opportunity to opt out. Employment contracts should reflect the new statutory requirements. Furthermore, employers should be aware that the statutory obligations to implement auto enrolment take precedence over the contractual position, if this is not compliant with the statutory obligations. Retaining a policy similar to the one shown here could put your client in jeopardy of creating parallel duties in the contract and under the Pensions Act. So an employee could argue that they are entitled to two pension schemes: The one the contract of employment refers to An Autoenrolment scheme Which would result in a costly practice I’m sure you’ll agree.
- I would advise employers not to include detailed auto enrolment information and obligations into contracts of employment to avoid potential confusion. “You could end up with a long winded set of terms in the contract and run the risk of creating parallel duties in the contract and under the Pensions Act,” as we’ve already mentioned. “The simplest thing is to put in the contract that the employer will comply with its statutory obligations on auto enrolment at the appropriate time. Employers should definitely be putting this or a simliar clause in any contract of employment for new employees. For existing employees the options would be to: Reissue the employment contract to include reference to new AE duties. Issue a letter varying the pension clause in the contract to the extent that all statutory obligations will be complied with.
- In some cases an employer may be able to continue to use their existing pension scheme if it qualifies. In order for an existing pension scheme to be consider a qualifying it must meet certain criteria which will vary depending on whether the scheme is defined benefit, defined contribution, or a hybrid scheme. In such instances the employer does not have a duty to auto enrol the employees and can opt for contractual enrolment. This method uses the terms and condidtion of employment / contract of employment to enrol the job holders rather than the auto enrolement duties. There are a number of factors to consider when opting for a qualifying scheme, although some employers may think it, contractual enrolment is not an easy way of getting out of auto enrolment and may in fact be more difficult to operate. Employers who decide to go with a qualifying scheme must still register with the Pensions Regulator and confirm they have complied with the legislation. Certainly among BrightPay’s customers we would see the majority of our customers opting for auto enrolment rather than qualifying schemes.
- Thank you for that Laura… it’s quite interesting to see how much of an impact that AE can have on everyday tasks, such as employment contracts. Bright Contracts is our sister product which is a software solution to easily create employment contracts and staff handbooks. The Bright Contracts licence also includes unlimited employers, unlimited employees, free support, and online HR templates and documents. So if you would like a demo of this please just let us know.
- Going back to the payroll and auto enrolment, BrightPay’s bureau licence costs £229 + VAT per tax year. This includes unlimited employers, unlimited employees, phone and email support, and full functionality for auto enrolment, CIS, P11ds, payrolling of benefits and RTI. So if you would a more in depth online demo of the software it will cover all aspects of BrightPay, including setting up a company on BrightPay, running your payroll on a day to day basis, sending RTI submissions to HMRC and setting up and processing auto enrolment.