29th October 2018
We have previously touched upon the fact that Europe infamously has the most complex payroll systems in the world, according to the CIPP (Chartered Institute of Payroll Professionals). Looking at the continent as a whole is futile, as each of the 44 countries has its own quirks and complexities which make it unique (and sometimes confusing!) in its own right.
Sure enough last week it came to light that there may be plans for the UK government to review its current pension tax relief system.
In the UK, it become mandatory in 2012 that employers must automatically enrol all staff into a workplace pension scheme. The Chancellor of the Exchequer, Philip Hammond, has recently indicated that from the next tax year (which begins on April 6th 2019) the minimum amount that companies must pay into this will change.
Since April 2015, the minimum employer contribution has been 2% of an overall minimum contribution of 5%, however this will be rising to 3% of an overall minimum contribution of 8%.
If you have staff in the UK, you must remember that it is employers and their pension scheme providers who are responsible for ensuring that the contributions meet the legally set minimum amounts. It may be that you needn’t take any action – if you are already meeting or exceeding the new minimum that is coming in, then you can rest easy knowing it’s all in hand.
However, if your current contributions do not meet the new legal minimum, then according to The Pension Regulator, it is the employers’ and their pension schemes’ responsibility “to make sure these increases are implemented”.
Do not be blasé about this…penalties for getting auto-enrolment wrong in the UK are hefty. This can include, but is not limited to fixed fines of over $500, escalating fines of $64 to $12,800 per day, and even a fine of $64,000.
With the right preparation you can avoid this.
Top tips to prepare:
- Assess whether you need to make any changes – does your contribution already meet or exceed the minimum requirement?
- If not, what rates do you need to apply to meet the new minimum contribution?
- Decide if it’s worth the risk of getting it wrong. To avoid all worry of the huge penalties detailed above, find a reputable payroll supplier to guide you through these changes to give you peace of mind.
The UK may be living up to its continents’ reputation of complex and confusing payroll, but by following the tips above, you can breeze through the upcoming changes with confidence.