The introduction of Real Time Information (RTI) next year together with the requirement to auto enrol employees in a pension scheme will mean all employers have new legislation to comply with. From April 2013 the way payroll information is reported to HM Revenue & Customs will change dramatically. Instead of completing a year-end P35 form containing details of employee information, employers will have to have to submit payroll information every time they pay employees, meaning it is essential all payroll data is complete and correct.
Employers should be preparing now to ensure that they are ready for the change to RTI.
– Can their payroll software handle RTI?
– Are they sure that their payroll information is correct?
– How will they ensure that they have all the necessary information before making a payment to a new employee?
As if that was not enough, employers should also think about what they need to do ahead of the introduction of pension auto enrolment. Between October 2012 and February 2018, employers will have to auto enrol all their eligible employees in a qualifying pension scheme. The exact staging (start) date will depend upon the number of employees on the payroll and their PAYE reference number, but the earliest an employer with less than 50 employees will have to introduce a scheme is June 2015. HMRC will write to employers 12 months before their staging date informing them of their legal responsibilities, but financial advisors are saying that it could take up to 12 months to put a qualifying scheme in place.
Unless they already have a qualifying pension scheme, employers must decide whether to use the government NEST (National Employment Savings Trust) scheme or set up a defined contribution pension scheme with an insurance provider. Employer contributions will be phased in at a minimum 1% of qualifying earnings, but will rise to 3% by 2018. The employer can pay more than the minimum contribution but by 2018 the total contributions must be 8%.
Employers also need to take action to identify which employees are eligible as they will need to write to all employees telling them whether they are to be auto enrolled or not. All UK based employees aged between 22 and the state pension age earning a minimum of £8,105 must be auto enrolled. There are penalties for non-compliance so employers need to ensure they get it right. An employee may decide to opt out, but it will be an offence for an employer to encourage an employee to opt out.
Any employer that has not yet taken action to prepare for the introduction of RTI or Auto Enrolment needs to seek professional help. A qualified accountant can advise on payroll software and the necessary preparation. In addition to explaining the legal requirements of auto enrolment, they will be able to refer you to a reputable financial advisor to help set up a qualifying pension scheme.