The government has set minimum levels of contributions that must be paid to the workplace pension. Employers must actively budget for the additional staffing costs of the new pension contributions increases from 6th April 2019.
The current rates under automatic enrolment are that the employer contributes 2% of the qualifying earnings and the employee contributes 3%. Earnings from employment can include salary, overtime, commission and bonuses. The new contribution rates will increase to 3% for the employer and 5% for the employee.
All employers must factor this increase into their budgets and make employees aware of their increase in contributions in a timely manner. The 8% total contribution may in some instances be paid by the employer if they wish to meet the burden of this extra cost.
The government pays into the pension scheme by giving tax relief on your contributions. The tax relief is at the basic rate of tax 20% and the pension provider claims the additional tax relief on your behalf and adds it to your pension pot.
We operate the government scheme NEST on behalf of our payroll clients. Please give us a call on 01698 421774 or 07543019957 if you wish to discuss setting up and operating this scheme.