• How will increases in minimum contributions (phasing) affect you? Feb 5, 2018
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    By law, the minimum contributions rates for automatic enrolment are also set to increase within the next 12 months. There are two stages to the increase in minimum contributions, which has been described as phasing. The first increase will take place this coming April and the second increase in April 2019.

    On the 6th April 2018, the total minimum contribution will increase from 2% to 5%. Employers will need to contribute a minimum of 2%. Employees will need to contribute a minimum of 3%. Minimum contributions will undergo further increases in April 2019, with the total minimum contribution rate increasing to 8%, representing a 3% employer and 5% employee contribution.

    It is an employer’s responsibility to make sure that they are prepared for these new contribution levels. If an employer wishes, they can decide to pay the total minimum contribution rate which is 5% from April 2018 and 8% from April 2019. In these cases, the employee does not have to pay any contributions, unless the rules of the pension scheme say otherwise.

    The employer and the employee can also choose to contribute a higher amount to the pension scheme if they wish. If an employer chooses to pay more than the employer minimum but less than the total minimum amount, then the employee must make up the difference.

    New employers who reach their duties start date on or after the 6th April 2018 will immediately be required to comply and implement the total minimum 5% contribution rate. Equally, employers who reach their duties start date on or after the 6th April 2019 will need to comply with the total minimum 8% contribution rate.

    Your payroll software will cater for the minimum contribution increases. Employers should see a notification or alert informing them that the increases are being implemented in April. Payroll will make it easy for employers to calculate the appropriate employee and employer contribution increases and show the amounts on the employee payslips.

    Free Phasing Webinar

    Register for a free phasing webinar to help you understand how these changes will affect your payroll processing. It’s completely free to attend.

    Register here


    Written by Karen Bennett | BrightPay Payroll Software

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