As an umbrella employee, you are automatically enrolled into a company pension scheme. Read our guide to understand how the auto-enrolment pension affects you.
What is an auto-enrolment pension?
Back in 2012, the government felt that people weren’t saving enough for retirement and introduced auto-enrolment to combat the problem.
In a nutshell, the rules mean that UK companies have to include all of their eligible workers into a pension scheme. The employer and employee make a contribution with each payroll run based on a percentage of the worker’s salary. The employee can choose to opt out of the arrangement if they’d prefer to make their own arrangements for retirement.
Employers are given a ‘staging date’ when they have to start enrolling workers onto their scheme. This is based on how many employees were on the payroll in April 2012. The aim is for all companies to be operating under this scheme by October 2018.
Who is eligible for an auto-enrolment pension?
Employers will automatically enrol employees who meet the following criteria:
• Are at least 22 years of age and below the state pension age
• Earn more than £10,000 a year
• Primarily work in the UK
As an employee of Parasol, your eligibility for the pension scheme will be determined based on these factors.
What does this mean for recruiters?
Auto-enrolment is extremely important if you engage with temporary workers on a Pay As You Earn (PAYE) basis. That’s because you’re responsible for enrolling them into a suitable pension scheme.
While this may seem like a burden, help is at hand.
How can an umbrella company help?
If you use a compliant umbrella company, such as Parasol, you’re in luck. Because the provider acts as a genuine employer, they’re required to operate the workplace pension scheme themselves – so there’s no need to worry.
When you join Parasol, you will automatically be enrolled into the company pension scheme. This means that all contributions to your pension will be made on your behalf.
What about limited companies?
Limited company contractors aren’t affected by the rules, provided they can prove they’re genuinely self-employed. This means there is no additional work for you to carry out.
If you need more information, our sister firm ClearSky Contractor Accounting can help.
What should recruiters look for when using an umbrella company?
The first and most important thing to check is that the provider is a genuine employer. If not, you’ll still have to supply the pension scheme and pay employer contributions – the very things you wanted to avoid in the first place.
You’ll also want to make sure that the provider is able to meet their obligations, so it’s a good idea to check out their financial position and see if everything’s in order.
Help from Parasol?
As one of the largest and longest established firms in the industry, you can trust us to look after your contractors and help shoulder your administrative burden. Over the years, we’ve gotten to know contractors inside and out, and have moulded our services to fit around their busy WorkStyle. We’re committed to being with our contractors all the way, ensuring peace of mind for them and you.
We can make contributions into your existing pension scheme so you benefit from a reduction in NI and PAYE tax. Alternatively you can join our Scottish Widows group pension scheme.
For more information regarding your finances or to find out how the auto-enrolment pension could affect you, the Parasol team is here to help. To speak to the Best Advice team, just give us a call on 01925 644423.