Our series of blog posts on making auto-enrolment a success for your payroll bureau clients draw upon Carval's extensive experience as both an outsourced payroll provider and also a payroll software developer.
Of the 45,000 SME employers that are due to stage for pensions auto-enrolment in 2015 (and over one million in 2016 and 2017), many will outsource their payroll to bureaus and accountants. So if your payroll business involves supporting small or medium-sized employers, it's likely you'll be asked for help. Here we look at some key questions that you will need to ask your clients when they ask you for help with the auto-enrolment process.
1) Have they already staged?
If they have you need to know the initial staging date and any other key dates like opt-out dates, postponement and reassessment dates for each employee.
2) Are all of their pensions schemes qualifying schemes?
If not employees may end up in two or more pension schemes. Can your payroll software handle this?
3) What are the scheme rules?
Often Clients will say it’s just a “standard” pension scheme. They don’t realise there’s no such thing as a standard scheme. Is it a pre or post tax deduction, is it a salary exchange type scheme. If it’s a salary exchange scheme, what do you do with the Employers NI saving? Do you keep it or pay it into the employees pension fund?
What pay elements are pensionable? Clients often don’t realise that just because a pay element is included in the Qualifying earnings calculation that doesn’t necessarily mean that it’s pensionable. An example of this would be that overtime would be included as Qualifying earnings but is not necessarily pensionable as per the scheme rules.
Always ask for a detailed definition of their rules - it really is very important. Carval's Payroll Bureau provides a questionnaire which prompts clients to think about their scheme rules in detail and we provide this to our software clients too.
4) What data is required by their pensions provider/s?
Before AE went live, Payroll Software providers had requested that pension providers get together and agree on a standard data template. Unfortunately even though we’re a few steps closer to this, the standard template has yet to materialise. So we’re currently stuck with having to provide data in various formats.
Each provider will have a detailed specification surrounding what the file format should be, headings, date format and so on.
It’s important to clarify the detail for each data item. You might have a field that says salary, but does that mean Annual salary, pay period salary or pensionable salary? If the employee is part time, they might want the FTE salary. Don’t take anything for granted.
Ensure that the specification is one defined by the Pension provider not a third party and badger them about anything that’s open to interpretation, you don’t want to have to redesign the data extract.
You should allow plenty of time for set-up. The back and forth with test files between yourselves – Customer – pensions provider/third party will undoubtedly take longer than you expect.
5) Who’s responsible for assessment and communications?
Some clients will require you to cover the end to end process, that is; the assessment of employees, communications to employees and to produce an output file to send to their pensions provider.
Others will have employed a third party or intermediary and will simply need you to do the assessment and provide them with details of who has been AE’d, become an eligible worker etc. Some clients will send a pre-defined data file to a third party who assess the employees and then notify the Customer regarding employee status.
Using a third party for assessment may on the face of it seem like a simpler option, but there can be pitfalls, which it is helpful to be aware of. Find out more in our free webinar below.