Auto enrolment remains a vital aspect of the UK’s workplace pension system, and with the changes introduced in 2024, it’s essential for employers to stay compliant. Whether you’re managing a large or small business, this guide walks you through the key updates, the benefits of payroll integration, and how to streamline your processes.
What’s New in Auto Enrolment for 2024-2025?
1. Minimum Age for Auto Enrolment
One of the significant changes in 2024 is the reduction in the minimum age for auto enrolment. Previously, employees had to be 22 or older to be automatically enrolled in a workplace pension scheme. As of 2024, this has been lowered to 18. Employers are now responsible for enrolling all eligible employees who meet this age criteria. This update ensures that younger employees start saving for their future earlier, giving them a better chance of building a good pension pot over time.
Source: The Pensions Regulator (TPR)
2. Earnings Thresholds for 2024-2025
The earnings thresholds remain in place for the 2024-2025 tax year, determining when employers need to start making pension contributions as detailed below.
Threshold | Weekly | 4-Weekly | Monthly | Annual |
---|---|---|---|---|
Lower Earnings Limit | £123 | £492 | £533 | £6,240 |
Earnings Trigger for Auto Enrolment | £192 | £768 | £833 | £10,000 |
Upper Limit of Qualifying Earnings | £967 | £3,867 | £4,189 | £50,270 |
Employees earning over £10,000 annually must be automatically enrolled, and contributions are calculated on earnings between £6,240 and £50,270.
Source: The Pensions Regulator Earnings Thresholds
3. Impact of the Lower Earnings Limit (LEL)
The Lower Earnings Limit ensures that employers are only required to make pension contributions on the portion of an employee’s earnings above £6,240. With the removal of other exemptions, even lower earners must now be enrolled into workplace pension schemes, further increasing the importance of maintaining an efficient, error-free process.
Integrating Auto Enrolment with Payroll Systems for Pension Integration
Managing auto enrolment manually can be time-consuming and error-prone, especially for businesses dealing with large workforces. Integrating your payroll system directly with your pension provider not only saves time but also improves accuracy and compliance.
Why Integration is Important
Payroll software such as BrightPay offers seamless integration with major pension providers, including NEST, The People’s Pension, Smart Pension, and Aviva. By automating data submissions, calculations, and employee notifications, integration helps ensure that everything runs smoothly without the risk of human error. Here’s what payroll integration can do for your business:
- Automatic Eligibility Assessments: BrightPay constantly monitors employee earnings and age to ensure they’re enrolled as soon as they meet the eligibility criteria.
- Direct Data Submissions: Forget about uploading spreadsheets or manually logging into pension portals. BrightPay sends the necessary data directly to the pension provider’s system via API (Application Programming Interface).
- Compliance Alerts: BrightPay ensures you meet key deadlines for re-enrolment, opt-outs, and pension contributions.
Learn more about BrightPay’s auto enrolment integration.
Real Example: From Manual Processes to Payroll Integration
One of our clients, a medium-sized business with around 150 employees, used to manage their pensions manually with spreadsheets and manual input direct to their pension provider. Their previous payroll company got them to upload spreadsheets themselves into their pension provider’s portal as they were accountants and didn't really want to be dealing with pensions. All changes to employee details had to be done manually.
The Problems:
- Data Entry Errors: The manual process led to frequent mistakes in pension contributions, missed enrolments, and even overpayments.
- Time-Consuming: The HR team spent hours every month cross-checking data between payroll and pension systems to the extent it dominated other tasks they needed to focus on.
- Compliance Issues: Manual oversight often meant that employees were not being enrolled on time, which put the company at risk of non-compliance, resulting in 2 fines in 12 months of £400.00 each.
The Solution with Crystal HR & Payroll Ltd.:
When we integrated their payroll system with BrightPay, everything changed:
- Automatic Enrolment: BrightPay automatically assessed employees for eligibility and handled all aspects of the enrolment process, ensuring that no one was missed. We put internal checks in place and created bespoke reports for our client to check, mostly for new starters that we hadn't been notified of due to their proximity to the payroll date or employees on secondment.
- Seamless Data Submission: Instead of uploading spreadsheets, pension data was submitted directly to the provider with just a click of a button. We also reconciled the pension once submitted to the pension company, adding a second layer of scrutiny.
- Reduced Errors: With fewer manual steps, the risk of mistakes dropped significantly, leading to more accurate contributions and improved compliance.
- Time Saving: Instead of the client spending hours on payroll and pension admin, Crystal freed up days, provided certainty the pensions were correct and eliminated fines and penalties which were a common theme for our client each year.
This automation saved the company both time and money, while giving them peace of mind that their auto enrolment process was fully compliant with TPR regulations.
FAQ: Auto Enrolment and Payroll Integration
1. What is the minimum age for auto enrolment in 2024?
As of 2024, the minimum age for auto enrolment has been lowered from 22 to 18. Employers are now required to automatically enroll employees as soon as they meet this age and earnings threshold.
2. What are the earnings thresholds for auto enrolment?
Employers must make pension contributions on earnings between £6,240 and £50,270. Employees earning over £10,000 annually must be automatically enrolled.
3. How does BrightPay integrate with pension providers?
BrightPay integrates with major pension providers, including NEST and Smart Pension, via API. This means pension data is submitted automatically, eliminating the need for manual uploads and reducing the risk of errors.
4. How often do I need to re-enrol employees?
Re-enrolment is required every three years. BrightPay can track these dates and automate the re-enrolment process, ensuring you never miss a deadline and issue all employee correspondence which we can customize with your logo and brand.
5. What happens if an employee opts out of the pension scheme?
BrightPay manages opt-outs automatically and updates records to ensure compliance. If an employee opts out, their contributions are refunded, and they are not re-enrolled until the next re-enrolment period.
Further Resources
To help you navigate auto enrolment and optimize your pension processes, check out these additional resources:
- Learn More About Salary Sacrifice: Discover how salary sacrifice can save your business money and increase employee pension contributions.
Read the guide here - Use Our Free Pension Contribution Calculator: Calculate pension contributions easily using our free tool.
Try the calculator here
Additional Resources
To keep up to date about the latest changes in auto enrolment, check out these sources:
- The Pensions Regulator - Auto Enrolment Overview
- UK Government - Workplace Pensions Guide
- NEST Pensions - Employer Resources
- Smart Pension - Employer Auto Enrolment
Final Thoughts
Staying on top of auto enrolment is a key responsibility for employers, and integrating payroll systems with pension providers can transform the process. At Crystal HR & Payroll Ltd we specialize in helping businesses manage their auto enrolment responsibilities efficiently, reducing errors and ensuring compliance every step of the way.
Need help managing auto enrolment?
Contact Crystal HR & Payroll Ltd to learn how we can support your business with payroll integration.