This article outlines the support that FreeAgent offers for pension auto-enrolment.
Please note that FreeAgent's payroll functionality won't be available if you have an unincorporated landlord account or if you're preparing your accounts using cash basis accounting.
An introduction to automatic enrolment
Automatic enrolment for workplace pensions (or ‘auto-enrolment’) affects all businesses that employ at least one person who isn’t a company director.
Under the initiative, all employers that have employees, other than directors without contracts of employment, are required to enrol eligible employees into a workplace pension scheme before their given auto-enrolment staging date.
There are a number of workplace pension providers to choose from, including NOW: Pensions, The People’s Pension and the National Employment Savings Trust (NEST). FreeAgent’s support for auto-enrolment works most effectively with pension schemes from NOW: Pensions, but you can still use the functionality if you choose another workplace pension provider. To find out more about choosing a provider, check out the guidance from the Pensions Regulator.
After enrolling employees in a pension scheme, employers must then start making regular contributions towards each employee’s pension through the company’s monthly payroll. The minimum monthly contribution is currently a total of 8% of an employee’s qualifying earnings. 3% of this will be contributed by the employer and the other 5% will be contributed by the employee.
If these rules apply to your business, there are a number of steps you’ll need to take, which are outlined in this guide from the Pensions Regulator.
This article explains the support that FreeAgent provides for auto-enrolment.
Setting your staging date
If the auto-enrolment requirements apply to your company, you will first need to enter your staging date in FreeAgent. Your staging date will be included in a letter that you should have received from the Pensions Regulator. If you have your PAYE reference number handy, you can also use this online tool to find out your staging date.
Under the initiative, all employers that have employees - other than directors without contracts of employment - are required to enrol eligible employees into a workplace pension scheme before their given auto-enrolment staging date.
To enter your staging date in FreeAgent, select 'Settings' from the drop-down menu in the top-right corner and then select 'Payroll'.
Use the date picker to enter the start date of your automatic enrolment duties.
FreeAgent’s auto-enrolment features will automatically be enabled on the date that you enter and you’ll then have six weeks to enrol your employees with your chosen pension provider.
Entering your NOW:Pensions scheme details in FreeAgent
If you enrol your employees on a workplace pension from NOW:Pensions, you’ll also need to enter the following details in the payroll settings area of FreeAgent:
- Pay code: this is a reference number that you create when you register with NOW:Pensions.
- Employer code: this is a reference number issued to you by NOW: Pensions. It should be displayed on any documentation that NOW sends you.
- Scheme code: a 3-character number shown on the scheme summary that NOW: Pensions issues you with when you sign up with them.
If you’ve enrolled your employees on a workplace pension from a different provider, you don’t need to enter any information in these three fields.
Assessing who is eligible and entering monthly contributions
Once you've run payroll for the month immediately before your staging date, your payroll dashboard will highlight which of your employees FreeAgent thinks are eligible for auto-enrolment based on their dates of birth and qualifying earnings.
You will then need to confirm whether each highlighted employee is eligible for auto-enrolment and whether or not they have opted in to your company’s workplace pension scheme. To do this, select the ‘Possibly eligible’ link displayed against the employee’s entry on your payroll dashboard.
Next, complete the details in the ‘Pension auto-enrolment’ section of the employee’s payroll profile. For eligible employees who are making contributions, select ‘Yes’ to 'Are they eligible?' and ‘Yes, making pension contributions’ to 'Are they making contributions?'.
Next, select ‘Yes’ to open up the ‘Is this employee making monthly pension contributions?’ section and then enter the amounts the employer and employee will contribute to the pension on a monthly basis.
If you’re using a pension scheme from Now:Pensions, enter the employee contribution in the ‘net pay contributions’ field.
If you’re using a pension scheme from a different provider, enter the employee contribution in the ‘net pay contributions’ field if it’s a ‘net pay arrangement’ pension. If you have a ‘relief at source’ pension, enter this figure in the ‘relief at source contributions’ field instead.
Finally, enter the employer contribution in the ‘employer contribution field’.
Remember to select ‘Update Payroll Profile’ to save your changes.
Downloading your contribution file
Each month, you need to inform your pension provider about which of your employees are enrolled in your workplace pension and how much you and they are contributing to their pension. You can export this information from FreeAgent by selecting ‘Export auto-enrolment CSV’ from the appropriate month in the ‘History’ area of your payroll dashboard. (You can also follow the link to that month’s payroll and select the ‘Export auto-enrolment CSV’ button from there).
This will download a CSV file which will be pre-populated with most of the information you need to provide as part of your monthly payroll reporting on auto-enrolment. (NB: If you are using Excel for Mac you need to save the file in Windows CSV format.)
You will need to review and/or manually enter the following entries on the CSV file:
||Manual entry required?
||If an employee’s basic pay, overtime, bonus, commission and statutory pay comes to more than £520 each month, FreeAgent will automatically include the additional amount (i.e. the total figure minus £520) in the ‘pensionable earnings’ area of the CSV file. If you set different criteria for pensionable earnings when you established your workplace pension scheme, you may need to manually adjust this figure in the CSV file after you’ve exported it.
|Employment start date
||The employment start date will be automatically populated on the CSV file for employees who started working for your company after you began using FreeAgent’s payroll. You will, however, need to manually enter the start dates of any employees who started working for your company before you began using FreeAgent’s payroll.
||This part of the CSV file will be automatically populated for eligible jobholders but you’ll need to manually enter this information for other employees. You have to include this information in the CSV file until the employee is enrolled in your workplace pension scheme. To find out more about assessment in relation to auto-enrolment, take a look at this document from the Pensions Regulator.
||You only need to provide this information for each employee in the first pay period in which pension contributions are deducted. You’ll need to manually enter the date into the CSV file after you’ve exported it.
||When applicable, you’ll need to manually enter this information after you’ve exported the CSV file. You can find out more about auto-enrolment postponement in this document from the Pensions Regulator.
|Additional voluntary contributions
||If the employee has made any additional voluntary contributions, you’ll need to manually enter this information after you’ve exported the CSV file. You’ll also need to reduce the amount shown in the Pension contributions - employee area (EE CONTS) of the CSV file. If the employee hasn’t made any additional voluntary contributions (AVCS), you can leave this field blank.
|Opt in date
||You’ll need to manually enter this information after you’ve exported the CSV file.
|Opt out date
||When applicable, you’ll need to manually enter this information after you’ve exported the CSV file.
Sharing your contribution file with your pension provider
If your workplace pension is provided by NOW:Pensions, you should submit your CSV file to NOW for validation once you’ve finished entering all the required information. Once you’ve received confirmation that your file is valid, you can upload it to NOW:Pension’s system; they should provide you with some guidance on how to do this.
If you choose a different pension provider you can reformat the export CSV or you may be able to enter the details directly in the pension provider system. Take a look at the guidance from The People’s Pension and NEST to find out how to construct CSV files in their required formats.