What Is Auto-Enrolment and How Will it Affect Your Business.

For many years now the Irish Government has been increasingly concerned about the pressure on the state pension fund with an ever increasing population and people living longer. Only 60% of private workers have pension schemes. Their proposed solution, due to come into effect in September 2024, is an Automatic Enrolment Scheme which will mean that small business owners have to match pension contributions for their employees adding to the already high costs of business. Read on for more information on how this will affect you and your employees. 

So what’s the current legislation around employee pensions?

As it stands, employers are legally obliged to provide access to at least one standard PRSA(Personal Retirement savings Account) within 6 months of them beginning their employment with you.However, at the moment there is no obligation on employers to make any contributions on their behalf. 

What You Need to Know About the Auto-Enrolment Scheme?  

Here’s a general overview of how the auto enrolment scheme is expected to work for small businesses in Ireland:

1. Eligibility: Auto-enrolment will target employees who meet certain criteria, such as age and earnings thresholds. It is expected that employees aged 23 to 60 who earned over 20k will be automatically enrolled in the scheme unless they are already contributing to another pension scheme.
2. Employee Responsibilities:

• Opting Out: Employees will have the option to opt out of the auto- enrolment scheme if they chose to do so. If they opt out, they will not be required to make contributions, and the employer would stop making contributions on their behalf. Employees must remain in the scheme for at least 6 months and are free to opt–out after that. Those who do decide to opt-out will be automatically re-enrolled at a later date.

• Contributions: How much the employee automatically contributes will be determined as a percentage of their gross earnings (up to €80,000) starting at 1.5% and increasing to 3% in year 4, to 4.5% in year 7 and 6% in year 10.

• Autoenrollment: Employers would be required to automatically enrol eligible employees into a designated retirement savings scheme. This means that when a new employee meets the eligibility criteria, they would be enrolled in the scheme without having to take any action.

• Contributions: Employers would also be required to make contributions to their employees’ retirement savings accounts.

• Information and Communication: Employers would need to provide employees with information about the autoenrollment scheme, including details about contributions, investment options, and the right to opt out.

For more information you can the full government guidelines here. 

My Advice on How to Prepare:

If you don’t know how to forecast your cashflow click here for more information on the Business F.I.T.T  ToolKit.Septemberrequire small business owners in Ireland to match employee contributions.