Start-ups face auto enrolment duties when employing new staff

From 1 October 2017, all start-up companies that employ new staff will have immediate duties to comply with pension auto enrolment rules, following the roll-out of the legislation over the past five years.

With all companies that existed prior to April 2012 having reached their staging date and established a qualifying workplace pension scheme, attention has now turned to new employers. Although there are some exemptions for sole traders and director-only companies, employers need to familiarise themselves with auto enrolment requirements and be aware that this should form part of their set-up process as soon as they are employing workers in the UK.
The Pensions Regulator has the power to carry out spot checks on any employer and can enforce financial penalties for non-compliance. These penalties can come in the form of daily fines which range from £50 to £10,000 per day, which will quickly become very expensive at a time when most start-ups are monitoring their cash flow extremely closely.
Start-ups should also be aware of the minimum contribution levels for employers, currently at 1% of salary (based on qualifying earnings), but due to increase to 2% in April 2018 and 3% by April 2019. Although these can be capped dependent on the definition of salary used, employer contributions should be taken under consideration when planning finances for the forthcoming years, particularly for those employers seeking to expand their workforce.
Moore Stephens has established their own pensions Master Trust specifically aimed at assisting small to medium sized employers through this process, providing an outsourced solution compliant with auto enrolment legislation. To discuss this further, please contact a member of our team.
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