The introduction of Pensions Auto-enrolment in Ireland is about to change the way you think about pensions in your small to medium-sized business. Pension Auto-Enrolment is a new large-scale pension implementation programme targeted at employees not yet saving for retirement. Set to begin in January 2025 (pending enactment of the Automatic Enrolment Retirement Savings System Bill), it’s going to make pensions more accessible for everyone. However, it will involve payroll and pension administrative changes for your SME. To help you navigate the scheme implementation, we’ve prepared a straightforward breakdown of how it affects your business and responsibilities.

So, what exactly is Auto-Enrolment?

Pension Auto-enrolment introduces a new way for certain employees to save for retirement. Employees who earn €20,000 or more per year, are aged between 23 and 60, and are not already in a pension plan, will be automatically enrolled into a pension scheme. This process is designed to make pension savings accessible to more people, however, there is a loophole, as after 6 months employees can opt out of auto-enrolment if they wish. 

What are my responsibilities as an SME?

For businesses, participation in Auto-Enrolment is mandatory (pending enactment of the aforementioned Bill). If your business does not meet auto-enrolment obligations, you could be liable for potential penalties or even prosecution. The aim here is to ensure every eligible employee is given the opportunity to save for retirement, without forcing employers to contribute to personal pensions outside of this scheme. Under auto-enrolment, contributions to an employee’s pension fund come from three sources: the employee, the employer, and the government. Starting at 1.5% of the employee’s annual salary from both you and the employee in the first year, this contribution rate increases to 6% by year ten.

What if we already have a Pension Plan? 

If your SME already offers a pension plan to employees, and employees in the salary bracket above are contributing, they won’t be automatically enrolled in the new scheme. This is good news for employers already supporting employee pensions. 

What happens if an employee changes jobs?

One of the benefits of the auto-enrolment scheme is its flexibility. Employees who move to another job will remain in the scheme, with their pension following them seamlessly. This simplifies pension saving for everyone involved in the scheme.

Auto-enrolment vs. Personal Pensions

The choice between auto-enrolment and implementing an employee pension plan is a significant one. It’s essential to compare the benefits of both options to determine what’s best for your employees and your business between now and the scheme implementation date.

Are there any nuances?

In short, yes. Employees can opt out of the pension scheme after six months, with the option for a refund. If they leave after contribution rates change, they’re entitled to a refund based on the difference in rates over the prior six months. For SME owners and payroll managers, understanding these nuances is crucial. 

Preparing for 2025 (previously end 2024)

With the start date for auto-enrolment moved to January 2025, SMEs have been afforded a little more time to prepare.  

We recommend that you take this time to:

• Review existing pension arrangements and schemes in detail,
• Analyse all existing salaries and identify anyone who falls outside a pension plan, 
• Take this time to understand the nuances and administrative aspects of auto-enrolment internally or with your payroll provider, 
• Conduct strategic financial modelling to assess the impact of auto-enrolment on your business in the long term, and 
• Stay informed, to ensure you’re ready to navigate the new pension landscape with confidence.

How we can help at Ormsby & Rhodes 

At Ormsby & Rhodes, we understand the importance of managing the upcoming auto-enrolment scheme effectively and without any disruption to your payroll. Our dedicated payroll solutions team will be supporting SMEs with managing scheme contributions both for employees and the employer, navigating the change from an administrative perspective, and ensuring you stay compliant with your obligations.  

If you are not currently utilising our payroll services, we invite you to reach out by emailing info@ormsby-rhodes.ie to discuss your requirements. Let us assist you in navigating the pension auto-enrolment process, keeping your payroll management straightforward and compliant.