PAYE & AUTO ENROLMENT
As an employer, you normally have to operate PAYE as part of your payroll. PAYE (Pay As You Earn) is HM Revenue and Customs’ (HMRC) system to pay income tax and National Insurance contributions.
Your employer deducts tax and national insurance contributions from your wages or occupational pension before paying you your wages or pension.
You only need to register for PAYE if your employees are paid £123 or more a week, have another job, get a pension, or they get expenses and benefits. You don’t need to register for PAYE. However, you must keep payroll records.
So, as an employee you will need to deduct tax and National Insurance for most employees from these payments. Other deductions you may need to make include student loan repayments or pension contributions.
After deducting Tax and NI, you’ll need to report your employees’ payments and deductions to HMRC on or before each payroll.
Your payroll software will work out how much tax and National Insurance you owe, including an employer’s National Insurance contribution on each employee’s earnings.
You’ll need to send another report to claim any reduction on what you owe HMRC, for example for statutory pay.
Based on your reports, you will be able to view what you owe HMRC, so you can pay them usually every month.
If you’re a small employer that expects to pay less than £1,500 a month, you can arrange to pay quarterly - contact HMRC’s payment enquiry helpline.
As part of your regular reports, you should inform HMRC when a new employee joins and if an employee’s circumstances change, for example they reach State Pension age or become a director.
You have to run annual reports at the end of the tax year including telling HMRC about any expenses or benefits.
By law, every employer with at least one member of staff has duties, including enrolling those who are eligible into a workplace pension scheme and contributing towards it.
This is called 'automatic enrolment' because it is automatic for staff – they don't have to do anything to be enrolled into a pension scheme, but it is not automatic for employers. From the date the employers are automatically enrolled they’ll have a month to choose not to join, or ‘opt out’. If they do nothing they’ll be enrolled in the scheme. They’ll make contributions to their retirement pot from their pay for as long as they’re employed or until they take their money out.
All employers that have at least one member of staff, automatic enrolment applies to them.
It is important for us to provide best services to our client by helping them with the automatic enrolment.
From 1 October 2017, if you are a new employer, automatic enrolment duties apply from the day you have a new member of staff started working for them.
All employers should nominate an employer contact who will receive important information from us. You may want to nominate us as an additional contact.
If you nominate us as an additional contact, we'll receive regular emails about the updates of your automatic enrolment duties.
Your staging date is the date that your auto enrolment duties first come into effect, and will have been determined by the size of your largest PAYE scheme as of April 2017, if you were in business at that time. Companies created between 02 April 2017 and September 2017 will have staging dates allocated to them that fall between May 2017 and February 2018.
If you became an employer on or after 2 April 2017 and before 30 September 2017, you may not have a staging date; your duties may have come into effect on your duties start date.
If you took on your first member of staff on or after 1 October 2017, you will have a duties start date instead of a staging date. In this case, your duties are effective from the day their first member of staff started working for them.
An employer's staging date is determined by the number of people in the largest PAYE scheme that they use, based on the data from HM Revenue and Customs held by us on 1 April 2012. An employer’s staging date is set in law and is the date their automatic enrolment duties apply to them. They must be prepared for this date.
You can decide to bring your staging date forward to align it with other business practices, such as the start of your financial year.
Checking who to enrol:
If you have business software (eg for payroll, HR and pensions administration), this could be set up to automatically assess and monitor staff ages, earnings and pension contributions paid into a pension scheme by a member of staff and/or your client.
After duties come to effect, you must carry out a full assessment of all their staff (including those on variable pay, flexible pay, irregular hours, etc). These full assessments should be enrolled the first time they earn over the automatic enrolment threshold. Once staff has been enrolled, the employer must pay regular contributions into their pension scheme.
If you are the sole director, the only people working for you are a number of directors, none of whom have an employment contract, or the only people working for you are a number of directors, only one of whom has an employment contract.
Automatic enrolment will apply if more than one director has a contract of employment. In this case, if your client does have automatic enrolment duties for a director, and the director meets the age and earnings criteria above, your client is not required to automatically enrol them unless your client chooses to do so.
Choosing a pension scheme:
If you have a staff to automatically enroll you will need a pension scheme. You will have to set up a new scheme or to check their existing scheme meets certain criteria, in order to choose a suitable scheme for you. Issues to consider include cost, whether it works with your payroll and tax implications for staff.
It’s advisable to take your time to make their choice. There are a number of different types of pension schemes available and different types of providers offering these schemes. The type of scheme most likely to be available to you is a scheme run by a large, specialist provider that is designed to be used by many different employers.
What letters can be sent to you from TPR?
The Pensions Regulator (TPR) sends out letters and emails to employers to support them with their automatic enrolment duties. These letters form a series of communications which are sent to you during the automatic enrolment process, helping you to understand your duties and guiding you through what to do next.
Declaration of compliance:
You must provide information to show you are meeting your automatic enrolment duties. This means completing a declaration of compliance using the online service as soon as possible.
You haven’t completed automatic enrolment duties until you submit your declaration to HMRC. The declaration is a secure online service.
You can only start your declaration of compliance online when you will receive your letter from HMRC, as you will need your letter code and PAYE reference.
An employer’s declaration is a legal duty. If it is not completed within five months of the start of your legal duties you could be fined, but you are able to authorise us to do this on your behalf.
Re-enrolment is the process where you must re-enrol certain staff into a pension scheme that can be used for automatic enrolment, if you’re not already active members of one.
It takes place every three years, and also happens on an immediate basis if a worker or the pension scheme meets certain criteria.
You must choose a re-enrolment date that falls anywhere within a six-month timeframe. This starts three months before the third anniversary of the date their legal duties began (your staging date or duties start date) and ends three months after it (a staging date of 1 October 2013 would mean the employer could choose to re-enrol between 1 July and 31 December 2016).
You don’t need to inform HMRC of your chosen re-enrolment date until you complete your re-declaration of compliance.
You must identify eligible staff, re-enrol them with effect from your chosen re-enrolment date and start contributing to your pension scheme from that date.
You must write to eligible staff individually, within six weeks of your chosen re-enrolment date, to tell them how re-enrolment applies to them.
You must complete a re-declaration of compliance within five calendar months of the third anniversary of the employer's staging date or duties start date.
You can’t use postponement on any staffs that needs to be re-enrolled.
However, we will make sure that the contact details you have given to HMRC are up to date, so they can send you information regarding your re-enrolment duties.