There are four steps to set up your Workplace Pension auto enrolment on bob:
> Import your data
> Sort your groups
> Choose the contribution model
> Select a provider
Import your data
Once you are up and running with bob, you probably have all the data you need. To complete auto enrolment, you must have:
> Employee names
> Email addresses
> Dates of birth
> Residential postcodes
> Payroll information: Salary and any variable pay, such as commissions, bonus or overtime
> National Insurance numbers
We’ll check to see if you have what you need and we’ll make it easy to add any missing data.
Sort your groups
On bob, we will use your employee data to set up two groups automatically:
Eligible - Employees aged between 22 and State Pension Age and earning at least £10,000 a year
Non-Eligible - Anyone younger, older or earning less than 10K
If everyone in your company earns their money on the same basis and you want to make the same level of contributions, you don’t need to set up any additional groups. Here are the key questions:
Does anyone have high levels of variable pay? - People who earn more than 15% of their pay from variable elements are treated a bit differently for Workplace Pensions. If some of your people earn a lot of commission, tips, bonuses or overtime - they may be better off in a separate group from those who don’t.
Do you want to contribute at a higher rate for some people? - It could be that you want to make more generous contributions to the lowest paid employees. You may want to reward the top team or the people who’ve been with you longest. Whatever the reason, they will need to be in a separate group.
If neither of these applies to you, you can skip this step and just use the single group we call ‘Eligible’.
Choose the contribution model
The Pensions Act 2008 set out several different ways of calculating pension contributions. Each of the options will meet your legal obligations and all the money goes into the employees’ pension funds. You just need to decide how generous you want to be.
To make it easy, bob shows you the options that apply for your people and how much each will cost in employer contributions. There are three different ways to calculate, called ‘bases of calculation’:
Qualifying earnings - Also called ‘banded earnings’ is normally the least expensive option. With this option, we start with the employee’s earnings, but before calculating the pension contribution we take of a slice from the bottom of each employee’s earnings and we put a cap on the top. Pension contributions are based on the ‘band’ in the middle. From April 2017, the lower threshold is £5,876, so this is deducted from earnings before calculating the pension contribution.The upper threshold is £45,000, so any amount over this will be disregarded when calculating the contribution. To illustrate:
For an employee earning £25,000 a year, you would base the contribution on £25,000 - £5,876 = £19,124. The employer’s contribution for now, will be 1% of this or £191.24.
For an employee earning £50,000 a year, you start with £45,000 because everything over that is ignored. The contribution will be based on £45,000 - £5,876 = £39,124, so at 1% the employer contribution is £391.24.
Basic pay - In this approach the pension contributions are calculated against the employee’s core earnings. For many that will be the monthly salary. For others it may be the regular hourly wage. What’s important is that it doesn’t include bonuses, tips, commissions, overtime or other variable pay. To illustrate:
Let’s say that our first example above earned £23,000 in wages and £2,000 as a bonus. The pension would be calculated against the £23,000, so the contribution would be £230.00.
If the employee earns so much in variable pay (tips, commissions, bonuses etc) that the basic pay is less than 85% of the total, calculating the employer’s contribution on the basic pay would put these employees at a disadvantage relative to other employees. To avoid this, the regulations say that if basic pay is less than 85% of total earnings, the employer must contribute an extra 1%. So- If our second employee earns £40,000 in salary and £10,000 in commission, the basic pay of £40k is only 80% of the total. In this case the calculation would be £40,000 x 2% = an employer contribution of £800.00.
Total earnings - This is the simplest to understand and to implement. The contributions are based on the employees' total earnings at each payday.
Choose your provider
We have two pension providers on bob, but we may add more. We show you the costs with each of the providers that will support your requirements. Both have some limitations. The decision must be yours. We can refer you to a financial adviser if you want their guidance. Financial advisers will give you access to more providers, but they will charge for the service.
Putting it in place
If you choose one of our integrated providers, we can pass some of your data and your choices through to the provider with your consent. There will then be some work to do to complete your Workplace Pension arrangements. This will include setting up regular updates with your payroll provider, arranging a payment mechanism and communicating with your employees. Both of our integrated providers offer facilities to help you.
It doesn't end there
Workplace Pensions are assessed at every pay cycle. People who were too young to be eligible will turn 22. Others will see their earnings increase, and still others may choose to opt out. Running your workplace pension will need some attention from now on. We will help wherever we can.