Just about everybody knows that they now need a workplace pension, as well as the one that is currently paid out by the Government at retirement age. It’s been quite a successful campaign for the government, as the big purple monster in the ads has made everybody aware that if they’re employed, then they need to pay into a workplace pension and their employer must too.
It’s taken a long time for businesses to get to grips with compulsory workplace pensions, as there has been a long period of communication, staging dates and deferments. Since the introduction of the Pensions Act 2008, there are also lots of new businesses and fresh limited companies that have become rather successful and are about to take on their first employee. As of October the 1st this year, the rules are changing and employing somebody for the first time has no grace period – there are legal duties that you must comply with right away.
The duties begin on your new employee’s first day on the job, which is known as the duties start date. Prior to this, if you are going to be paying somebody over a particular threshold, you need to register as an employer. It’s also a good idea to sort out public liability insurance before your new employee begins, in case of accidents, injuries or losses in the workplace.
Up until now, the Government has been giving an offset date, known as the ‘staging date’ for when they’d be required to abide by the legislation. Most companies have found that this has been a significant way off in the future, to allow them time to prepare for the new rules. The difference is that now, whether you’ve been in business for two years or two months, if you take somebody on for the first time after October 1st, you’ll need to make sure you’re compliant from day one.
So, who needs a workplace pension? Firstly, anybody has the right to opt in to a workplace pension scheme. This basically means that they can ask their employer to be placed into one, and the employer must agree – but won’t have to put in contributions themselves, they’ll be entirely employee based. It’s compulsory for anybody aged between 22 and the State Pension Age who earns more than £833 a month to be placed into a workplace pension scheme where the employer makes contributions too.
This becomes particularly interesting for small companies who are planning on taking their first employee between August and October – registering as an employer takes between four and six weeks, but you can’t register more than two months before your new employee’s first payday. It’s entirely likely that if you would need to offer legal duties from the very first day.
If you’re at all concerned about registering to run PAYE or becoming an employer – then it’s best to contact your accountant; generally speaking, the rules are straightforward and most businesses will simply need to take a few steps to comply. There are a few variations, such as fixed term contracts of less than three months, but any accountant will be happy to discuss and advise of your liabilities.