Personal and family companies – What is the optimal salary for 2021/22?
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22nd April 2021Automatic enrolment has had many benefits for employees. Since 2012, the number of private-sector employees with a pension scheme has risen by over 35% due to successful auto-enrolment.
For small employers, auto-enrolment can be difficult to manage – the same responsibilities as listed PLCs stand, without the large payroll department that can manage it effectively.
Alternatively, you can download the full guide here –
What are my responsibilities?
As soon as any employee is eligible for a pension, you must:
How do workplace pensions work?
What are the rules for temporary staff and irregular earners?
Auto enrolment can be postponed for a maximum of three months, which is useful for employing temporary staff. It can also be delayed if an employee has handed in their notice or has a rise on their normal earnings. This can happen when an employee receives a bonus, but due care should be used, as if this becomes a regular occurrence, it can be considered as part of yearly earnings. As such, these bonuses could push earnings over £10,000 per year and result in auto enrolment.
What is the process?
In the first month, you as the employer must deduct the employee contribution from their pay and then make the relevant contribution. These then must be passed onto the pension provider accompanied with certain personal data collected from the employee.
The pension provider will then set up the account and will contact the employee, detailing the scheme and how they can opt out. Employees then have 30 days to opt out and get their contributions refunded, otherwise they won’t get their contributions back. They can choose to re-enroll in the future.
Employers pressuring employees to opt out of the pension scheme is illegal, making it easier for the scheme provider to deal with the employee directly.
What about contribution rates?
The minimum combined contribution rates are 8% of the qualified earnings – a minimum of 3% needs to come from the employer. Remember that qualifying earnings in 2019/20 are between £6,136 and £50,000.
Whilst these are minimum requirements, many employers decide to offer more as an attractive benefit.
What are the pension taxes?
Pension deductions are tax-free, with two different ways to set them up in payroll – relief at source and net-pay. These are explained further in the full guide that you can download below.
What are my responsibilities with re-enrolment?
New employers, even if they have no employees eligible to join a pension scheme must provide certain information to the Pensions Regulator within five months.
Make sure to do these things:
You can download the full guide here -……………………………………
If you’d like a meeting or a Skype call to discuss this, please get in touch with your favourite Liverpool accountant