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The Ins And Outs Of Auto Enrolment Pension Schemes

Starting your own business can be scary, especially if you do it alone. If you start a business in conjunction with a partner or two, at least you have someone to talk to when you run into a problem. That’s when, not if. If you don’t have any partners, that’s it. You are out there on your own, Pal, sink or swim. You cannot be sure that you are going to make a go of it, but you have to do it on your own.

Certainly, you are producing products or providing a service that you understand and know about, and you may have been working for another company in the same line of business for years before taking the plunge. But nonetheless, those first few days or weeks can be nerve-wracking.

Of course, when you start to take on a few customers, a lot of that stress goes away. You knew that you could do it, and now you have. And so, you work away over the next “however long it takes” until you come to the point where you realise that you cannot keep going on your own because you have too many customers to service, and that means that you need to take on an employee.

You probably didn’t give that much thought when you stepped out into the big, wide world on your own because you were putting all your thoughts and efforts into getting your business off the ground. In one way, needing to take on your first employee is a milestone in itself, but you are also taking on a lot of further responsibilities.

If that employee is between age 22 and state pension age and you are paying him or her more than £10,000 a year, you have to enrol him or her into your pension scheme.


Yes, you read that correctly. You have to enrol him or her into your pension scheme. And before you ask “What pension scheme?” it is the pension scheme that you have to provide to every employee who is eligible from the day that you take them on. You also have to make a contribution to the pension of that employee.

Under the Pensions Act 2008, the date that you take on your first eligible employee is known as the Duties Start Date and from then on, your pension scheme also has to be offered to an entitled worker.

What’s The Difference?

What’s the difference? You have to enrol your eligible employee into the pension scheme automatically. A non-eligible employee is one who is earning above £10,000 per year and is aged between 16 and 21 or aged between state pension age and 74, or is earning between £6,136 and £10,000 per year and is aged 16 - 74. However, an employee earning less than £6,136 a year who is aged between 16 and 74 is an entitled worker, and if he or she asks to join your pension scheme you must enrol them into it, but you don’t have to pay a contribution in this case.

It’s good, this, isn’t it?

But it gets better. At PayCheck, as one of the foremost payroll outsourcing companies in the UK, we understand all this. You could be in a situation where you only have one entitled worker, but if that worker asks to join your pension scheme – which you don’t have – you have to set one up.

Furthermore, an eligible worker whom you have auto-enrolled can apply to opt out. If they opt out before a certain deadline, they have to have any contributions they have made up to that point to be refunded. If they opt out after the deadline, they do not receive a refund. However, they can also choose to opt in again later on, and if they do that you are on the merry-go-round all over again.

But wait: if they opt out and don’t opt in again, in three years’ time you have to automatically re-enrol them! And they can opt out again! Or not.

Even better, the Pensions Regulator can issue you with fines if you don’t comply with all this legislation. It’s a nightmare.

Alternatively, as one of the foremost payroll outsourcing companies in the UK, we can not only deal with your payroll, but also your auto enrolment pension scheme.

That leaves you to get on with running your business and making a profit – which is what it is all about – and leaves us to do the grunt work.


This article was written by
The Pay Check Team
+44 (0) 20 7866 4600