A legislative proposal to broaden the scope of the auto-enrolment (AE) programme has successfully passed through Parliament indicating that it is set to become a regulation in the foreseeable future.

The Bill aims to promote earlier and increased savings for millions of lower-earning individuals throughout the UK.

What are the regulations on current automatic enrolment?  

Auto-enrolment remains a complex issue for businesses, with additional costs and payroll administration attached to the proposed changes.

Current auto-enrolment contributions depend on several factors:

• Any employee who earns over £10,000 should be automatically enrolled in the scheme. The minimum contribution from each employee must add up to eight per cent of their wage. As the employer, you must contribute at least three per cent of this.
• An employee earning between £6,240 and £10,000 per year won’t automatically opt into the scheme but can request to be. In this case, the business must contribute at least three per cent of the total eight.
• Those employees earning less than £6,240 can opt into the scheme but the business is not required to contribute.

What changes will the new Bill make?

The legislation provides two notable changes to Government policy in relation to AE, allowing them to:

• Reduce the minimum age for contributions to 18 years old.
• Decrease the minimum earning threshold for employer contributions from £6,240 to just £1, meaning that virtually any employee can request to be included in the scheme.

Whilst early auto-enrolment could lead to greater retirement savings for employees, it also brings substantial obligations for businesses.

The introduction of the Bill will bring administrative changes and expenses, elevating the contributions required from employers and adding to existing payroll management challenges.

If you are concerned about how these legislative changes might affect your business, get in touch with one of our experts.