Auto-enrolment for carers – what is it and should you be providing it?
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Auto-enrolment is a new pension policy set up by the government in the UK. It’s designed to get as many employees into a pension scheme as possible. There is a responsibility upon all employers to ensure that anyone they employ is properly assessed. If eligible, they must be placed into an occupational pension scheme.
This now applies to any employer, from large corporations right down to so-called ‘micro’ employers. If you directly employ a carer, these pension rules apply to you. And you must legally comply with the auto-enrolment policies or The Pension Regulator could take action against you. This could be in the form of compliance notices and penalty notices (fines). Long-term non-payment could mean the courts are brought in to recover debt.
Here we’ll explain what auto-enrolment is for your carer, whether it applies to you and how to get started. We also explain how using a payroll service could deal with most of the auto-enrolment process for you.
What is auto-enrolment for carers?
Anyone who employs at least one person must comply with The Pensions Regulator and auto-enrolment. Every employer in the UK must place their eligible staff into an occupational pension scheme and contribute to it. This applies whether you employ just one carer to help you at home, or multiple people.
Auto-enrolment is part of an employer’s legal duties, in the same way you must pay National Insurance for an employee. These duties apply even if the person you employ to care for you is a family member or friend. The rules also apply regardless of how you pay for your carer. If you get Direct Payments or a Personal Budget from your local authority, and use this to employ a carer directly, you are still considered an employer.
Eligible employees should be placed into an auto-enrolment pension scheme by their employer. You, as their employer, must make a minimum contribution into the pension scheme, as should your employed carer. If your carer is not eligible for auto-enrolment, they may be eligible to ‘opt in’ to the pension scheme instead.
Is my carer eligible for auto-enrolment?
Not all personal carers will be eligible for the auto-enrolment scheme. However, it is important that you, as the employer, do a proper assessment. There are different criteria for different levels of auto-enrolment.
- If your carer is aged between 22 and state pension age, and they earn over £192/week (£833/month or £10,00/year), they must be auto-enrolled. You must place them in a pension scheme and you must make contributions.
- If your carer is aged between 16 and 21, and they earn over £192/week (£833/month £10,00/year), they have the right to opt in to a pension scheme. If they ask to opt in, you must place them in a pension scheme and you must make contributions.
- If your carer is aged between 16 and 74, and they earn between £118 and £236/week (£512 to £833/month), they have the right to opt in to a pension scheme. If they ask to opt it, you must place them in a pension scheme and you must make contributions.
- If your carer is aged between 16 and 74, and they earn less than £118/week (£512/month), they have the right to join a pension scheme. You should find them a suitable pension scheme, but you are not required to pay any contributions.
You need to apply these rules to anyone you employ. You may find that you don’t need to auto-enrol your employee if they don’t earn enough. If your carer does not meet the eligibility for auto-enrolment, you still need to prove that you have met your legal duties. This involves filling in a Declaration of Compliance, which proves you have met your legal duties towards your staff. You will also need to provide a written letter to your carer to explain how auto-enrolment applies to them.
How much do I have to pay towards my carer’s pension?
Employer pension contributions are set at a minimum level. They were most recently increased on 6 April 2019. It is your responsibility as an employer to ensure that any increases in contributions are implemented on time.
The current minimum contribution to a pension scheme is 8%, made up of 3% from the employer and 5% from the employee. This is a percentage based on your carer’s earnings. There is a handy Employer Contributions calculator on The Pensions Regulator website.
How do I get started with auto-enrolment?
A great place to start is on the official The Pensions Regulator website. You can run through an online tool that explains what your legal duties are when employing a member of staff for the first time. You can find that here.
If you already have a carer who is eligible for the scheme, it’s really important to get the auto-enrolment set up as soon as possible. If you are late setting up a pension scheme, based on the date your carer would have become eligible, you will have to backdate contributions. You can find out more about that here.
The first thing you will need to do is choose a pension scheme. It must be one that is set up for automatic enrolment. You can find one yourself, or ask a financial advisor for options. There is more advice on this here.
You then need to place your eligible carer into the scheme, giving your pension scheme provider all the relevant information. You then need to work out the contributions that both yourself and the employee need to pay, and arrange how these will be paid. You can then start paying the contributions.
You will need to formally tell your carer in a letter that they are being put into a pension scheme, and then fill in the Declaration of Compliance. Your employee can choose to opt out of the scheme, but they must first be enrolled.
Can a payroll service help with auto-enrolment?
Auto-enrolment is not complex, but it is time-consuming. It is also another consideration to make when choosing to become an employer. Alongside tax and National Insurance, there are a lot of calculations to make and there are legal ramifications for not meeting these duties.
For this reason, many individual employers opt to use a payroll service like the one offered by YtB. A payroll service will work out all of the income tax, National Insurance and auto-enrolment contributions on your behalf. They will also process timesheets, issue payslips, work with HMRC and file records, produce P60s and P45s, calculate any statutory pay and let you know how much you need to pay your carer each month.
In terms of auto-enrolment, a payroll service like the one we provide, will assess your carer on your behalf, enrol your employees into a scheme, process any opt-in or opt-out requests and provide all letters needed for your employee.
If you’re worried about employing a carer, a payroll service can help take on a lot of the responsibility of being an employer. Take a look at the YtB Payroll Service to find out more.
- Published on Oct 29, 2019