Ocean Village

Auto-Enrolment Eligibility Guidance

Under the Pensions act 2008, it is a legal requirement to auto-enrol certain employees onto a workplace pension. If you have hired at least one person to work for your business, this means you are an employer and have legal duties to adhere to, and auto-enrolment pensions are one of them. This guide will help you to understand auto-enrolment eligibility and how it works.

What are auto-enrolment pensions?

The government’s workplace pension plan requires employers to automatically enrol staff, of a certain age and earn over a specific amount, onto a workplace pension. Auto-enrolment is designed to ensure that workers have easy access to a pension, helping them towards retirement. Eligible employees are automatically enrolled on the pension scheme, with an opt-out choice if they decide not to participate.

Employers must ensure that new, eligible employees have their pension scheme properly set up and manage changes from staff requests.

Auto-enrolment eligibility

Who is eligible for auto-enrolment?

Employees who fit the following criteria are eligible for auto-enrolment on the workplace pension scheme:

  • Ages between 22 years and state pension age
  • Earn at least £10,000 a year
  • Classed as a ‘worker’
  • Usually work within the UK

Who is not eligible for auto-enrolment?

Although employees under the age of 22 are not eligible to be auto enrolled on a pension, they can still ‘opt-in’ to the workplace pension if they want to. This applies to employees aged between 16-21 or state pension age to 74, or if they earn between £6,240 to £10,000 per year.

If these employees ask to join the pension scheme, as an employer you must contribute towards this. These employees are known as non-eligible jobholders.

You must also allow employees aged between 16-74 but that earn less than £6,240 a year the option to ‘join’ a pension scheme if they want to, but this does not need to be a qualifying pension for the purposes of auto enrolment. As their employer, you also do not need to make any contributions unless you choose to. These are known as entitled workers.

Assessing auto-enrolment eligibility

What to consider when assessing auto-enrolment eligibility:

Payroll software

If you use payroll software to pay staff, you will need to ensure that the system you use can assess employee details, so the correct employees are automatically enrolled. You will also need to keep employees updated so they know how auto enrolment effects them, where their workplace pension is being held and ultimately allow them to opt out if they choose to.

Accountancy firm

You will need to ensure you provide the details of all existing and new staff if you outsource your payroll to an accountancy firm, this is so they can assess your employees for you. Using a specialist accountancy business will help to ensure you make no mistakes with future employees and their workplace pension enrolment.

When to assess staff

Assessing employees is an ongoing duty, and you need to assess all employees for auto-enrolment eligibility and categorise them into eligible jobholders, non-eligible jobholders and entitled workers.

Each month you need to review the following:

  • Check there are any new eligible jobholders that are required to be automatically enrolled
  • Monitor any postponement rules in place
  • If any new employees have opted in or out of the pension scheme
  • Generate any statutory letters for employees with a change in circumstance that affects their auto enrolment eligibility.
  • Monitor contributions to ensure statutory minimums are met.

What to do with new starters

As long as any new starters fit the eligibility criteria, they can automatically join your business pension scheme. However, you may be able to delay assessing your employee’s eligibility by up to three months. This can coincide with a new employee’s probationary period, although they would still have the option to opt in during this postponement period

Temporary and part-time staff auto-enrolment eligibility

Both part-time and temporary staff need to be assessed using the same eligibility criteria as the rest of your permanent, full-time employees.

Employees with variable earnings that go over the threshold will automatically enrol onto the workplace pension, if eligible jobholder postponement is not used. If their pay goes back under the threshold, they will remain a member of the pension scheme unless they decide to opt-out. If eligible jobholder postponement is used, the assessment is deferred and assuming earnings go below the threshold in the deferred assessment period, the employee would not be enrolled.

Penalties and failure to comply

As an employer, your business or your third party must meet the legal obligations. Failure to comply means the Pensions Regulator can issue you with a warning requiring you to resolve the issue with a time scale. You could also receive a statutory notice to pay the arrears with interest to the employee.

If you still fail to do as asked from the Pension’s Regulator, you may receive a penalty fine of £400, escalating from £50 a day to £10,000 a day, depending on how many workers you have. If the failure is by a third party, then the escalating penalty is £200 a day.

If you want more information on auto-enrolment eligibility, please contact one of our team who will be able to help.

The HWBulletin

Our HWBulletins cover a range of subjects, including some of the services that we offer and an update of the recent changes that have, or will take place.

Read latest issue.

Taxation News

Did you forget to renew your tax enquiry fee protection?


Academies Accounts Direction 2023 to 2024 Summary

Let’s Talk

Why not arrange a FREE consultation and find out what we can do for your business.