Monthly Archives: April 2016

Auto Enrolment Earnings

I have been asked what the levels of auto enrolment earnings are that mean an employer has to set up a qualifying auto enrolment pension scheme.

Auto Enrolment Earnings

Although an employer does not have to automatically enrol employees earning less than the earning trigger for auto enrolment, an employee can choose to opt in.

Typically, a pub or café may have no employees earning above the auto enrolment earnings trigger of £10,000 per year.

However, they can choose to opt in and the small employer is burdened by additional employee costs and professional fees processing their payroll and auto enrolment obligations. See my post Auto Enrolment Burden on Small Businesses

Auto Enrolment Earnings and Employee Ages for Eligibility

The Three Employee Categories

Entitled Worker

  • Aged 16 to 74
  • Earn less than the qualifying lower earnings threshold of £5,824 a year (£486 per month or £112 per week)
  • An employer does not have to automatically enrol ‘entitled workers’. If the employee decides to opt in, the employer does not have to contribute to their pension fund.

Non-Eligible Jobholder

  • Aged 16 to 74
  • Earns more than £5,824 a year (£486 per month or £112 per week) but no more than £10,000 a year (£833 per month or £192 per week)

Other non-eligible jobholders:

  • Aged 16 to 21 or between State Pension age and 74
  • Earn more than £10,000 per year (£833 per month or £192 per week)

The employer does not have to automatically enrol ‘non-eligible’ jobholders. If the employee decides to opt in, the employer must contribute to their pension fund.

Eligible Jobholder

  • Aged between 22 and State Pension age
  • Earns more than £10,000 per year (£833 per month or £192 per week)

The employer must automatically enrol ‘eligible’ jobholders and contribute to their pension fund unless the employee decides to opt out.

Disclaimer

The above is not exhaustive and is for guidance only and you should consult your accountant or other professional adviser before taking action on any of the above. See the Disclaimer

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What Company Stationery Information?

company-stationery-information
Company Stationery Information
To limit personal liability and for tax purposes, many small businesses incorporate and become limited companies.

On incorporation, a company must provide company stationery information on letterheads, invoices, official orders, delivery notes, cheques and so forth.

Company websites must also provide certain company information.

Below, I have summarised some of the legal requirements of the Companies Act.

Information Required on Company Stationery

The following information must be clearly shown on company stationery:

    • The full name of the company as shown on the Certificate of Incorporation including the word ‘Limited’ or ‘Ltd’. See note below.
    • Place of registration: ‘registered in England & Wales’, ‘registered in Scotland’ etc. depending where it was registered.
    • The company registration number as shown on the Certificate of Incorporation.
    • The registered office address as recorded at Companies House and shown as the ‘registered office’ if the trading address is different.
    • All company cheques must show the word ‘Limited’ or ‘Ltd’ as above, if not, the signatory will be liable for the value of the cheque if it is not honoured.

Note: There is no difference between ‘Limited’ and ‘Ltd’. These two suffixes are interchangeable if the company has the full ‘Limited’ suffix on the Certificate of Incorporation. If, on the Certificate of Incorporation the suffix is ‘Ltd’, then only ‘Ltd’ can be used and not ‘Limited’.

Information Required on Company Websites

As with official company stationery, the company websites also have to include certain information as follows:

  • The full name of the company as shown on the Certificate of Incorporation including the word ‘Limited’ or ‘Ltd’. See note above.
  • Place of registration: ‘registered in England & Wales’, ‘registered in Scotland’ etc. depending where it was registered.
  • The company registration number as shown on the Certificate of Incorporation.
  • The registered office address as recorded at Companies House and shown as the ‘registered office’ if the trading address is different.

This information does not need to be on every page but it must be easy to find. Some web sites show the information in the footer section of every page but it can be simply put on the Contact page.

Disclaimer

The above is not exhaustive and is for guidance only and you should consult your accountant or other professional adviser before taking action on any of the above. See the Disclaimer

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Auto-Enrolment Burden on Small Businesses

Auto-Enrolment

The Auto-Enrolment burden of workplace pensions will be forced on even the smallest business between now and the end of 2017.

Auto-enrolment sounds great, “we’re in” rings from the TV publicity. But it can be heart ache for small businesses that can ill afford such a financial burden.

For career politicians that have never had a proper job, it’s fabulous to come up with these great ideas to encourage pension savings. This perhaps opens up an opportunity for the Government to release it’s State pension responsibilities in the future and pass that responsibility onto employers.

Indeed, for small one person businesses, it can well discourage them to expand and take on their first employee.

Let’s look at the costs for both the employee and employer:

By law you must pay at least the minimum employer contribution in the last column above with the employee making up the difference between that figure and the total minimum contribution in column 2.

I have defined ‘qualifying earnings’, ‘total pay’ and ‘basic pay’ further down this post.

Let us look at a scenario of a small business with one employee earning £288 basic pay for a 40 hour week (£7.20 an hour National Living Wage). The following table shows the minimum annual contributions that have to be paid:

On op of the employer contribution, the business owner will also have to pay the costs of running auto-enrolment. Unless they do it themselves and risk heavy penalties, they will have to use a payroll bureau. Most, if not all, payroll bureaus will insist on doing both the normal payroll and auto-enrolment as one without the other is destined for disaster!

So, a small employer with one weekly paid employee forced into using a payroll bureau because of auto-enrolment may incur the following typical additional costs:

Payroll processing at £16.50 per week plus £22.00 year end processing = Total £880.00 per year

Auto-enrolment processing £31.50 per month = £378.00

Total costs before any contribution to Auto-Enrolment pension scheme £1,258.00

What goes into the pension fund based on employee working 40 hours a week at 7.20 (£14,976 PA):

Annually up to Sept 2017 – £449.28

Annually up to Sept 2018 – £898.56

Annually from October 2018 – £1,347.84

You do the sums, it costs the employer nearly as much in extra overhead after October 2018 as goes into the pension pot.

There may also be a £35 or more set-up fee for each employee and some pension providers like The Peoples Pension are charging the employer a £500 set-up fee. I know NEST Pensions are not making a set-up charge to employers yet. With set-up charges, ongoing processing charges etc, small employers are being hammered with extra employment costs many cannot afford.

Possible extra burden for the small employer with one weekly paid full-time employee on National Living Wage after October 2018 is £1,857 before set-up costs and all that goes into the employees pension scheme from the employer (before pension fund management charges) is £599. It costs the small employer with one employee as above £1,258 more than the employer contributes.

This really is a true burden on small businesses.

Let’s define the terms ‘qualifying earnings’, ‘total pay’ and ‘basic pay’:

Qualifying earnings’ is the name for a band of earnings you can use to calculate pension contributions. For the 2016/17 tax year, it’s all an employee’s earnings between £5,824 and £43,000.

Total pay’ means all payments made to a worker, including their salary/wages, plus any commission, bonuses, overtime and so on.

Basic pay’ means a worker’s salary/wages and statutory payments like sickness and maternity pay, but it excludes commission, bonuses, overtime and so on.

Employers and employees can pay more than the minimum contribution but the upper limit depends on your pension fund provider.

For more information on what you need to contribute, visit The Pensions Regulator relevant web page.

Disclaimer

The above is not exhaustive and is for guidance only and you should consult your accountant or other professional adviser before taking action on any of the above. See the Disclaimer

 

 

 

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EU In or Out?

The EU has been part of our lives for more than forty years, but is it now time for a divorce or for reconciliation?

EU

I am reading a book that I feel will help me decide whether or not to vote ‘In’ or ‘Out’ in June’s EU Referendum.

Here is a link to the book Europe In or Out: Everything You Need to Know

What will happen if Britain leaves the EU – and how will it affect you?

Europe: vital for Britain’s economy and global standing or a bureaucratic monster hell-bent on destroying our national sovereignty? And why is no one talking about what leaving Europe would actually mean?

Addressing the real issues surrounding a potential exit from the EU – including jobs, travel, immigration, investment, sovereignty and justice – this fully updated and revised edition of David Charter’s essential guide investigates the consequences both for the country and for the person on the street.

A clear, comprehensive and compelling account of the impact of the EU and the implications of Brexit, this definitive, unbiased handbook, from an expert in the field, is essential reading for anyone with an interest in Britain’s future.

I hope the right decision is made by the British public in June, for business and our lives in general.

 

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