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Auto-enrolment is a must-do, and yes, it will be a cost to your business. This could be significant - so you do need to understand and budget for it. Here's our handy guide to what you need to know and what you need to plan for.
Contributions are the payments that you and each employee make into the employee’s pension. It's how each pension pot is built up.
See below for examples and illustrations of how contributions work in practice.
Company X – they have already staged.
The current total minimum contribution level is 3% and the minimum employer contribution level is 2%. But Company X have chosen to pay a higher level of 3%.
From 6 April 2018, at the first increase in payments, their employees will begin paying in 3%. That brings the total contributions to the minimum 6%.
From 6 April 2019, combined contributions will have to reach a minimum of 9% - with the employer paying at least 4%.
There are a couple of different ways of working out contributions based on earnings. This means you might see different numbers, depending on different providers. Here’s why.
There are several types of earnings, each with differing contribution levels and complexities.
|Payment method||Now - 5 April 2018||6 April 2018 - 5 April 2019||6 April 2019 onwards|
Basic Pay - bases contributions on pay before any additions such as bonuses or overtime.
Qualifying earnings - includes a variety of things like salary, commission, bonuses, sick or maternity pay – these tend to vary every month.
Total earnings - contributions are worked out based on full earnings before tax. So these must include all inclusions and deductions (such as overtime, etc).
With the basic pay payment type, calculating the amount you have to pay each time tends to be much simpler, because basic pay tends to be stable.
Other payment types may use a slightly lower contribution level, but the additional work could be a major headache – and a time-thief too. We think that the simplicity offered by using basic pay is well worth it.
We charge you £100 per month. We’ll put our hand up – we know we’re a bit more expensive than some other providers out there but we believe that in terms of value for money it’s well worth it.
There are some things you’ll need to do on an ongoing basis once you’ve set up your scheme and got your employees enrolled. You’ll get the full details of this once you’re set up, but so that you can plan ahead we’ll summarise everything.
If you want to see how much your scheme is likely to cost you can get a quote right now. Just fill out the first part of the form and take a look at your personalised report.