Pensions Without the Panic: Understanding Auto-Enrolment

emma-bbs
5 days ago
4 min read

If you employ staff, you’ve probably heard about auto-enrolment and if the phrase makes you sigh or quietly roll your eyes, you’re not alone. It’s one of those things every employer has to deal with but few truly enjoy.

While pensions might not be the most exciting part of running a business, getting them right is vital. Auto-enrolment isn’t optional, and missing deadlines can land you in hot water with The Pensions Regulator.

Let’s break it down: what auto-enrolment really means, what employers need to do, and how to keep things simple (and compliant).

What is pension auto-enrolment?

Auto-enrolment is the government’s way of making sure more people save for retirement. It requires every employer to:

Assess their workforce to see who’s eligible.
Automatically enrol eligible staff into a workplace pension scheme.
Contribute to that pension alongside the employee.

If you employ at least one person (even part-time), you have responsibilities under auto-enrolment. Directors who pay themselves a salary through payroll may also have duties, depending on how the business is set up.

Who needs to be enrolled?

There are three main employee categories:

Eligible jobholders – Aged between 22 and state pension age, earning over £10,000 a year. These must be automatically enrolled.
Non-eligible jobholders – Can choose to opt in (and you must contribute if they do).
Entitled workers – Can ask to join, but you don’t have to contribute.

Even if you only have one employee, you’re still responsible for assessing them and enrolling anyone who qualifies.

Employer responsibilities

Auto-enrolment comes with a few key ongoing responsibilities:

Choose a pension scheme – It must meet government standards for qualifying contributions and investment options.
Assess your staff every payday – Circumstances change, so you’ll need to check who’s eligible each time.
Enrol eligible employees and make the correct deductions.
Communicate with staff – You must write to each employee explaining what’s happening, their options, and how to opt out if they wish.
Pay pension contributions – Both your share and the employee’s must be paid on time.
Keep records – Of assessments, opt-outs, and payments (for at least six years).

Contribution rates

Currently, the minimum total contribution is 8% of qualifying earnings, made up of:

Employer contribution: 3% (minimum)
Employee contribution: 5% (usually deducted via payroll)

“Qualifying earnings” include salary, wages, bonuses, overtime, and statutory payments like sick pay or maternity pay.

The declaration of compliance

Once you’ve set everything up, you need to complete a declaration of compliance with The Pensions Regulator. This confirms that:

You’ve assessed your employees.
You’ve enrolled the eligible ones.
You’ve started making contributions.

You must submit the declaration within five months of your duties start date. Failure to do so can lead to fines. Even if you don’t have any staff to enrol, you still need to tell The Pensions Regulator that you’re complying.

Ongoing responsibilities and re-enrolment

Auto-enrolment isn’t a “set and forget” system. Every three years, you must:

Re-assess your workforce,
Re-enrol any eligible employees who’ve previously opted out, and
Submit a re-declaration of compliance.

You also need to keep an eye on:

New starters and leavers – they must be assessed as soon as they join.
Pay rises or changes in hours – employees can move between categories as their earnings change.
Opt-outs and refunds – if someone opts out within a month, you must refund their contributions.

It’s a lot to manage — which is why many small businesses get help with it.

Common mistakes employers make

Auto-enrolment isn’t difficult once you know what’s required, but there are some easy-to-miss pitfalls. Here are a few we see regularly:

Assuming directors are automatically included – they’re not, unless they have an employment contract.
Forgetting to write to employees – written communication is a legal requirement.
Missing the declaration deadline – The Pensions Regulator won’t accept “I didn’t know” as an excuse.
Incorrect contribution calculations – forgetting to include bonuses or overtime can cause shortfalls.
Not keeping records – you must retain evidence of assessments and contributions for years after submission.

How we can help

At Bay Bookkeeping Solutions, we manage auto-enrolment as part of our payroll bureau service, so employers don’t have to stress about it.

We can:

Assess employees each pay run to check eligibility.
Enrol new staff and process opt-outs.
Calculate and submit pension contributions.
File declarations and re-declarations of compliance.
Keep your payroll and pension records aligned.

In short, we make sure everything’s done accurately and on time, so you can focus on running your business, not reading pension regulations.

Your Auto-Enrolment To-Do List

✅ Choose and set up a qualifying workplace pension scheme.

✅ Assess your employees every pay period.

✅ Enrol eligible staff and send out the required letters.

✅ Make sure pension contributions are deducted and paid on time.

✅ Submit your declaration of compliance within 5 months of your start date.

✅ Keep detailed records for at least six years.

✅ Re-enrol and re-declare every 3 years.

Final thoughts

Pensions might not be the most exciting part of being an employer, but they’re one of the most important. Auto-enrolment isn’t just a legal requirement, it’s a way of helping your employees build a more secure future.

By understanding your responsibilities, staying on top of deadlines, and getting the right systems in place, you can take the panic out of pensions entirely. When your payroll and pensions are running smoothly, everyone sleeps a little better.