Since 2012, workplace pensions have become a compulsory part of employing staff in the UK. This initiative, known as the Automatic Enrolment (AE), requires all eligible employers to automatically enrol their eligible workers into a pension scheme and contribute to it.

While the rollout is complete, compliance isn’t a one-off task. It’s an ongoing responsibility that can easily trip up businesses, regardless of their size. And at Ellis & Co, we understand the complexities and thus are here to help you ensure you’re meeting your legal duties and avoiding penalties from The Pensions Regulator (TPR).

But before that… What is Auto-Enrolment? 

In simple terms, AE means that as an employer, you must:

1. Assess your workforce: Identify which of your staff are “eligible jobholders”, or basically classed as ‘workers’, based on their age and earnings.
2. Set up a pension scheme: Choose a qualifying workplace pension scheme that meets certain legal requirements.
3. Automatically enrol eligible staff: Put these staff members into the chosen pension scheme.
4. Make contributions: Both you (the employer) and your eligible employees will contribute to the pension pot.
5. Communicate with staff: Inform your staff in writing about how auto-enrolment affects them, including their right to opt out.
6. Declare compliance: Tell TPR that you’ve met your duties.
7. Ongoing management: Continuously monitor your workforce, manage opt-outs and ins, and re-enrol eligible staff every three years.

Who Needs to Be Auto-Enrolled?

An employee is generally considered a “worker” and must be automatically enrolled if they:

• Are aged between 22 and State Pension age.
• Earn over £10,000 a year.
• Work or ordinarily work in the UK.

Important: Even if an employee doesn’t meet these criteria, they may still have a right to “opt in” or “join” your pension scheme. In some cases, you might still have to make employer contributions if they earn above a lower threshold (currently £6,240 per year).

Minimum Contribution Levels

The current minimum total contribution into an AE pension scheme is 8% of “qualifying earnings” (including tax relief). This is usually made up of:

• 3% from the employer.
• 5% from the employee (this includes 1% tax relief from the government).

Note: “Qualifying earnings” are typically earnings between £6,240 and £50,270 (for the 2025/26 tax year). So your pension provider or payroll software will calculate this for you.

Common AE Pitfalls & How to Avoid Them

Even with the best intentions, it’s easy to fall short on AE duties. So here are some common mistakes our clients make and how to ensure you stay compliant:

1. Missing Your “Duties Start Date”: For new employers, your duties begin the moment your first employee starts working for you. So don’t delay in getting set up!
   The Solution: As soon as you employ someone, assess your duties and begin the setup process for a pension scheme.
2. Not Assessing All Staff Correctly: It’s not just about new starters. You must continuously monitor the age and earnings of all your staff, as they might become eligible at different points.
   The Solution: Use a reliable payroll software or a professional payroll service that automatically assesses employee eligibility for each pay period.
3. Late or Incorrect Declarations of Compliance: You must declare to TPR that you’ve met your duties within five months of your duties start date (and re-declare every three years).
   The Solution: Mark your calendar! This is a firm deadline, but rest assured your payroll provider (if you have one) can often handle this submission for you.
4. Failure to Send Statutory Communications: You’re legally obliged to write to all your staff (eligible, non-eligible and entitled) explaining how auto-enrolment applies to them. Take note that there are strict deadlines for these letters.
   The Solution: Utilise template letters from TPR or rely on your payroll provider to send these communications on your behalf.

5. Incorrect or Late Contributions: Deducting contributions from employees’ pay but failing to pay them to the pension provider on time (usually by the 22nd of the following month) is a serious breach.
   The Solution: Integrate your payroll and pension systems, or have your payroll provider manage contribution payments directly with your pension scheme.
6. Not Re-enrolling Staff: Every three years, you must reassess and re-enrol any eligible staff who previously opted out or stopped contributing.
   The Solution: Keep track of your re-enrolment date (this is usually three years after your original duties start date) and ensure this recurring task is performed.
7. Inducement to Opt-Out: It is illegal to encourage or force an employee to opt out of the pension scheme.
   The Solution: Ensure all communications are neutral and informative, whilst focusing on your employees’ legal rights and choices.

Penalties for Non-Compliance

Keep in mind that TPR has significant enforcement powers and is not afraid to use them. And the penalties for non-compliance can be substantial, which range from:

• Compliance Notices: Formal warnings to rectify issues.
• Fixed Penalty Notices: A £400 fine for failing to comply with a statutory notice.
• Escalating Penalty Notices: Daily fines ranging from £50 to £10,000, depending on the size of your business, for continued non-compliance.
• Unpaid Contribution Notices: Requiring you to pay backdated contributions (potentially including the employee’s share).
• Civil Penalties: Up to £5,000 for individuals and £50,000 for organisations in severe cases.
• Prosecution: In extreme cases of wilful non-compliance, individuals could face criminal prosecution and even imprisonment.

And beyond the financial penalties, non-compliance can lead to reputational damage, low employee morale and time-consuming investigations, which will lead to a downward spiral of stress and financial loss.

So… How Can Ellis & Co Can Help You Stay Compliant?

We understand how navigating the intricacies of AE can be a significant burden for any business. Which is why at Ellis & Co, we offer comprehensive payroll and auto-enrolment services designed to ensure you meet all your obligations seamlessly:

• Initial setup: Helping you choose a suitable pension scheme and establishing your duties start date.
• Ongoing assessments: Automatically identifying eligible employees and managing new starters.
• Contribution calculations & payments: Ensuring correct and timely payments to your pension provider.
• Statutory communications: Drafting and sending all necessary letters to your staff.
• Declaration of Compliance & Re-enrolment: Managing these crucial submissions to TPR.
• Expert advice: Keeping you informed about legislative changes and answering your auto-enrolment queries.

Don’t let auto-enrolment become a source of stress or a financial risk for your business. Partner with Ellis & Co and gain the peace of mind that comes with knowing your pension responsibilities are in expert hands. See what our director, John Farrell, has to say:

“For many businesses, particularly smaller ones, automatic enrolment can feel like a maze of regulations and ongoing duties. However, ignoring these responsibilities is not an option. We (Ellis & Co) see the stress and potential penalties that arise from non-compliance. So it’s our aim is to simplify this complex area, ensuring our clients not only meet their legal obligations but also gain peace of mind.”

Get in touch today at  01244 343504 or info@ellis-uk.com for a consultation and ensure my auto-enrolment is fully compliant!

About Ellis & Co

Ellis & Co is a leading accountancy firm specialising in payroll, bookkeeping, accountancy & audit, tax planning and business advisory services. We work with a diverse range of businesses, from start-ups to established companies, ensuring they have the financial clarity and support they need to succeed. With our team of experienced accountants based in Chester and Wrexham, we are proud to offer personalised solutions that help businesses succeed.