Auto Enrolment is the Government’s attempt to increase participation in workplace pension arrangements.
Auto Enrolment requires employers to enrol eligible employees into a workplace pension, unless the employee opts out. The employer cannot force an employee to opt out.
Once enrolled, there is normally an obligation for both employer and employee to contribute to the pension. Confusingly some of the writing on the topic refers to a “government contribution” – this isn’t in cash, just tax relief.
The process is overseen, and regulated by, The Pensions Regulator (TPR).
“Eligible job holders” – over 22, younger than state pension age, and earning over £10,000 pa. These staff members have to be enrolled. The employer will need to deduct employee contributions from their salary, and make the employers contribution on top.
“Non eligible job holders” – not otherwise an “eligible job holder” (above) and, between 16 and 74, and earning over the Earnings Threshold (currently £6,240 per year 2025-26); in practice this means either (i) those aged 22 to state pension age and earning more than Earnings Threshold but less than £10,000 or (ii) those between 16 and 21 or state pension age to 74 and earning over £10,000 (and thus not “eligible job holders” by virtue of their age). These workers have to be given a choice about opting in, and if they do then the Employer will need to deduct employee contributions from their salary, and make the employers contribution on top.
“Entitled job holders” – aged 16 to 74 and earning less than the Earnings Threshold (currently £6,240 per year 2025-26). Have a right to join an employers pension scheme and have deductions from their salary, but the employer doesn’t have to make employers contributions.
Staff will fall into one of the following categories:
| Gross earnings | Age 16 to 21 | 22 to SPA | Age SPA to 74 |
|---|---|---|---|
| Over £833 a month (Over £192 a week) | Has a right to opt in1 | Must be enrolled2 | Has a right to opt in |
| Over £520 up to £833 (Over £120 up to £192 a week) | Has a right to opt in | Has a right to opt in | Has a right to opt in |
| £520 and below (£120 and below a week) |
Has right to join a pension scheme3 | Has a right to join a pension scheme | Has a right to join a pension scheme |
Employers cannot opt out, but Employees can. However the Employer has an obligation to re-enrol anyone who opts out, after three years, although the Employee can opt out again.
Employers must not coerce Employees to opt out.
Minimum contributions are currently (6 April 2019 onwards)
- Employer 3%
- Employee 5%
- Due on earnings of between £6,240 and £50,270 a year.
Employers need to:
- Register with The Pensions Regulator
- Select a low charging pension scheme which complies with TPR rules (in most cases the Government sponsored NEST, but there are private alternatives)
- Give information to Employees
- Enrol or auto enrol as appropriate
- Pay deductions and employer contributions to pension company
- Re-enrol after three years anyone opting out
- Assess changes in the work force, eg people whose pay level or age changes, which changes their categorisation between eligible, non eligible and entitled, and enrol those coming into the system
- Complete a declaration of compliance with TPR no later than five months after staging date
http://www.thepensionsregulator.gov.uk/docs/automatic-enrolment-online-registration-checklist.pdf
Remember that one person companies are employers, and directors or secretaries who receive a salary or fee are employees – conversely being a shareholder and receiving dividends doesn’t render someone an employee – the difference is between earned income (pay, wages, salary, directors fee, etc) and unearned income (dividends).
There are very few exemptions and notably Auto Enrolment needs to operate even if you only have one staff member eg
- A sole trader with one assistant or
- A sole trader paying their spouse over the Earnings Threshold for administration.
However the following exemptions do exist:
- Office holders (directors and secretaries) who do not have a contract of employment – this is an important exemption for our PSC and small company clients, however if there are any other Employees who are not officers then the exemption fails.
- Employees without an employment contract – we understand that TPR include spouses assisting in a business in this category (unless they have an employment contract).
TPRs guidance on exemptions for officers is at:
- What if I don’t have any staff?
- Directors and automatic enrolment – do you have duties?
- We’re a family business – do automatic enrolment duties apply to us?
Detailed guidance on Workplace Pension obligations can be found on The Pension Regulators Website