Step 3 Prepare a plan This is one of the most important steps. There are many decisions that need to be made ahead of your business’s staging date. Some of these may require additional steps such as board approval or contractual amendments which may also require consultation periods. It is advisable to bring together a team of people including those responsible for payroll, HR and any pension advisers you may have who have knowledge and expertise in this area.
5
Auto enrolment will bring additional costs to the business. Not only from the employer’s pension contributions, but there may be additional costs such as software updates and advice. More importantly it will take time. Many employers have vastly underestimated the amount of time needed to implement automatic enrolment. This additional time can have an indirect cost on the business and place additional strain on staff who may already be busy with their existing workloads. Employers also need to decide on the definition of pensionable salary and the level of contributions they want to set. The table below details the minimum requirements laid down:
Chosen definition of earnings
Up to 31 March 2018
From 1 April 2018 to 31 March 2019
From 1 April 2019
Minimum Total Contribution
Minimum Employer Contribution
Minimum Total Contribution
Minimum Employer Contribution
Minimum Total Contribution
Minimum Employer Contribution
2% 1%
5% 2%
8% 3%
Qualifying Earnings
6% 3% 5% 2%
9% 4% 7% 3%
Basic Salary
3% 2% 2% 1%
Total Earnings
2% 1%
5% 2%
8% 3%
Alternative Definition
* It is possible to use an alternative definition of your own, however, this must consist of at least a basic salary and reflect at least 85% of the total payroll (this can be assessed at a scheme level).
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