Automatic enrolment of employees into a workplace pension will affect every employer over the next couple of years.

Every employer has a legal duty to enrol all eligible employees into a pension scheme. They also need to assess their employees according to certain criteria to find out who is ‘Eligible’.

2015_SEP_UK_XERO - Automatic enrolment and pension schemes in Xero

We’re building assessment, auto enrolment, and workplace pension capabilities in Xero. We know our small business owners aren’t pension experts. We’re also providing tools for our accountants and bookkeepers to help with pensions. This way you can always lean on your trusted advisor.

Your business must comply with the auto enrolment legislation from your staging date. According to the latest research by The Pension Regulator, almost two thirds of the UK’s smallest employers don’t know their staging date.

When is your staging date?

We’ve worked with The Pension Regulator to help you find your staging date. The majority of our customers using Payroll in Xero start staging from January 2016 onward. Most have a staging date between July and December 2017. We’ll soon be adding the ability for you to record the staging date in Payroll Settings.

Do you know when your staging date is? You can find out by using The Pension Regulator’s staging date tool.

There are some circumstances where entering your PAYE reference won’t provide your staging date. Including:

  • You’ve brought forward your staging date and agreed this with The Pensions Regulator. If you’ve notified The Pensions Regulator that you intend to bring your staging date forward, these changes won’t be reflected in the dates returned by the tool.
  • You’ve set up your business after 1 April 2012. If this applies to you, you can find your staging date in the table below.
  • You have changed your, or acquired a new, PAYE reference since 1 April 2012 . You will need to enter the old PAYE reference(s). If you are a new employer entity then please refer to the bullet point above.
  • You have certain types of staff but don’t have a PAYE scheme. In this case your staging date will be 1 April 2017.
  • You had fewer than 30 staff on 1 April 2012, had no staging date associated with your PAYE reference, and you don’t fall into any other exception category. In this case your staging date will be 1 April 2017.

The Pensions Regulator’s recommend that employers start preparing for automatic enrolment twelve months in advance of their staging date.

Managing automatic enrolment & workplace pensions in Xero

You need to meet your legal obligations for payroll, automatic enrolment and workplace pensions. We want you to know how Xero plans to support this moving forward. Since the launch of Payroll in Xero in April, employers have been able to:

  • Set up Auto Enrolment information e.g. Pension Provider, Pension Contact Information
  • Set up Payment Defaults e.g. calculate employee and employer contributions
  • Indicate which employees are Eligible and making contributions, vs. which have opted out or are not eligible

However, this is just the start as we’re working to bring much more to our customers and partners including:

Helping you to stay compliant

You will be able to use Xero to assess your workforce (explained below). You no longer need to worry about doing this yourself. You can also automatically enrol the required employees into your chosen pension scheme and send communications to employees.

Assessing your workforce

The status of your employees can change from period to period depending on age and earnings. Xero looks at all of this identifies which categories your workers are in. Once your staging date arrives Xero can take care of the rest.

Opt Out and Leave the pension scheme

You will also need to deal with opt out and leave requests from your employees. Whether an Eligible employee opts out or leaves depends on the timeframe in which you receive the request. If you receive a valid opt out notice you can remove them with Payroll in Xero. It doesn’t matter if it’s from an employee, or from the pension provider. You can also process opt out refunds directly in Payroll in Xero.

Opt In and Join the pension scheme

As an employer, another duty you have is to allow ‘Non-eligible jobholders’ and ‘Entitled workers’ to join the pension scheme if they choose. If you receive a valid opt in notice from an employee, you will be able to opt them into your pension scheme using Payroll in Xero.

Sending Pension Correspondence

You’re also legally required communicate with your employees about their pension status. Payroll in Xero will inform you of the correspondence you must send each employee. You can automatically make this available to employees via email and the employee portal. We will even keep track of what has been sent and when, so you have a full audit history.

Sending Pension Data

You also need to inform your pension provider of certain information. Information like employee details, status and what contributions they’re due to make. Unfortunately the pension providers all have different data requirements at this point.

We’re planning to integrate with Systemsync and their Pensionsync platform to enable seamless data exchange with pension funds from Payroll in Xero. If your pension provider is supported by Pensionsync, this information will be automatically sent to them from Xero. If your pension provider isn’t supported, we’ll provide a standard CSV export. You will have to manually transfer the data to your provider. We’ll be communicating what pension providers will be supported in the future.

Need help on Auto Enrolment? We suggest contacting one of our Certified Advisors and referring to the “Your step-by-step guide to automatic enrolment” by The Pension Regulator.

Oliver Furniss Xero

Xero is beautiful, easy to use online accounting software for small businesses and their advisors. Xero provides business owners with real-time visibility of their financial position in a way that’s simple, smart and secure.
Xero has over 400,000 customers in more than 180 countries around the world and is listed on the NZX and ASX. Xero was ranked #1 by Forbes − World's Most Innovative Growth Companies 2014.