Staging dates are based on the size of an employer’s PAYE scheme as at 1 April 2012 not the number of employees on the date that the automatic enrolment is due to start. The greater the number of people in the PAYE scheme (on that date) the earlier the staging date.
Employers can use a staging calculator provided by The Pensions Regulator to confirm their exact staging date. Most firms with less than 50 employees will start the process between 1 June 2015 and 1 April 2017. New employers will get their own, later, staging dates but should all be signed up to use automatic enrolment by February 2018.
It is also possible, under certain circumstances, to bring forward or move back an employer’s allocated staging date. The implementation of automatic enrolment is being staggered, in part, to ensure that the process is well managed and takes into account the time needed for businesses to adjust.
Contributions for automatic enrolment
Both the employer and employee need to make contributions to a pension scheme. There is a minimum employer contribution that will eventually reach 3%. Employers can make higher contributions if they so decide. Employees must also make contributions which are part funded by tax relief. By 1 October 2018, contributions in total will be a minimum 8%: 3% from the employer, 4% from the employee and an additional 1% tax relief.
The minimum contributions that employers must pay into their staff’s pension scheme are shown in the table below:
||Employer minimum contribution
||Total minimum contribution
|Employer's staging date to 30 September 2017
|1 October 2017 to 30 September 2018
|1 October 2018 onwards
As the table shows, the employer’s contributions are being phased in and start at 1% rising to 3% of staff’s qualifying earnings. The qualifying earnings amount is set by the Department for Work & Pensions. There is no requirement to begin making contributions until after an employer’s staging date.
For the current (2015/16) tax year this is set between £5,824 and £42,385 a year. This means that the first £5,824 of an employee’s earnings isn’t included in the automatic enrolment calculation. For example, if a worker earns £20,000 their qualifying earnings would be £14,176. The maximum amount contributions can be based on is £36,561 (£42,385 minus £5,824) for the 2015/16 tax year. This issue received much press commentary as employees won’t actually see the 8% contribution based on their full salary.