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Do I need to give my employees a pension?

The short answer is yes, but not necessarily immediately.

New laws on workplace pensions require all employers to provide pension schemes for their employees.  These rules apply to all employers in the UK even if you have just one employee.

As an employer you now have a duty to “auto enrol” your employees into a pension scheme.  This means that rather than employees having to chose to join a pension scheme, employers must “automatically enrol” all employees into a pension scheme unless the employee actively choses to opt out, so as to encourage people to provide for their pensions.  Employers must auto enrol all staff aged over 22, who work in the UK and earn over £10,000 per annum.

When these new laws come into force for your business will depend on the “staging date” for your payroll scheme.  The staging dates run up to 2018 with larger payrolls being staged first.  You can find your “staging date” by typing your company PAYE reference into the Pensions Regulator website here.

These new regulations also bring with them new rules on minimum contributions that employers must make for their employees.  These minimum contributions are being introduced gradually, starting at 1% employer contributions at staging date, rising to 2% from 1 October 2017 to 3% from 1 October 2018 onwards with similar levels of contributions for employees.

Planning

The key point with all of this is planning.

Businesses need to understand as soon as possible when these regulations will affect them and put plans in place to ensure that they meet the new rules by the time their staging date comes around.

There will be costs involved in setting up a new pension plan and also obviously costs associated with the employer contributions that you will have to make.

Therefore get advice early and ensure these additional costs are factored into your business plans and projections.  Also it’s worth starting this process earlier as its likely that if you leave it to the last minute the costs of setting an appropriate scheme up will be higher.