Pensions Auto-Enrolment: What Employers Need to Understand for Payroll and Time and Attendance Monitoring

Pensions Auto-Enrolment: What Employers Need to Understand for Payroll and Time and Attendance Monitoring

Auto-enrolment onto a government-led national workplace pension scheme is due to begin as of January 2025 throughout Ireland. This means that employers need to gear up for the changes in more ways than one. The government has been trying to publicise the new rules that will affect most employed people in the country in one way or another. However, not everyone with a workforce in Ireland is as prepared as they should be.

This is where Snow payroll and time and attendance solutions come into their own. The implications of not being up to speed with the demands being placed on employers to conform to auto-enrolment could be catastrophic for some businesses, especially smaller ones which may be liable to legal challenges if they’re found to be negligent. Quantum Payroll is Snow’s purpose-built payroll solution for Irish employers and it will deal with all of the requirements of auto-enrolment in one fell swoop. What’s more, it integrates fully with our internationally renowned UKG workforce management system, the perfect way for employers to manage their time and attendance records in a way that is compliant with auto-enrolment whether they employ workers full-time, part-time or on any other basis.

Firstly, let us take a closer look into auto-enrolment and what it means for most Irish firms with a workforce.

What Does Auto-Enrolment Entail?

In the private sector, it is estimated that over a third of workers have no pension savings at all. The government has decided that this needs to change. Therefore, the Automatic Enrolment Retirement Savings System for Ireland legislation was drafted. It passed into law in April 2024 and will take effect from New Year’s Day 2025. Anyone who runs a small to medium-sized enterprise or who has a professional interest in human resources and payroll will need to be appraised of what auto-enrolment will mean for them.

Essentially, anyone who is an employee – that is to say, someone who is not self-employed, a minor or already retired – will be automatically enrolled on a pension saving scheme. Thus far, companies have been able to set up private pension schemes for their employees or, failing that, it has been possible for employees to make their own pension saving arrangements. From next year, anyone who is earning €20,000 or more a year will automatically join a pension scheme as mandated by law. This will affect everyone in that earning bracket who is 23 years or over up to the age of 60. The only exceptions to this rule will be employees who are already covered by an employer’s occupational pension scheme. In other words, workers who already have a pension fund they are paying into won’t be mandated to pay twice.

When employees reach the state retirement age which, in Ireland, is currently 66, they will be able to draw down sums from their pension savings. The amount they will be paid out will be reflected by how much they have paid in over the course of the scheme’s existence and for how long they’ve been earning. It is worth employers noting that such sums will be paid in addition to the state pension. The idea is to improve the financial circumstances of pensioners without the state needing to pay more and more.

From an employer’s perspective, the pension scheme itself and the drawdown of entitlements will be subject to state oversight and outside of their legal obligations. What employers will be responsible for, however, is managing their payroll accurately because every month, week, fortnight or whichever payment schedule they run, will now need to include up-to-date figures and reflect any pension contributions being made into the scheme. For employers with people who work different hours or who are subject to performance-related bonuses that can affect pay dramatically from one payroll to the next, it will mean many businesses will have to up their game. Inaccuracies with auto-enrolment are not likely to be taken lightly and could lead to the authorities taking steps to investigate a firm’s payroll accounting more closely.

How Will Auto-Enrolment Work?

Auto-enrolment payments will be managed by the Pensions Authority, a government body that will also be responsible for pension payments as contributing individuals begin to reach retirement age. This authority will be overseen by a board of directors with ultimate responsibility residing with the Financial Services and Pensions Ombudsman.

When an auto-enrolment payment is taken from an employee’s salary, it will have to be matched by the employer. On top of this sum, the state will add a further amount. When added together, for every €30 an employee puts into the scheme, he or she will receive €70. However, they will be allowed to opt out of the scheme if they want. Auto-enrolment merely assumes people are taking part unless they specifically state they do not wish to. Under the current rules, anyone who has been automatically enrolled can opt out after six months if they wish.

Moreover, if an employee were to leave for another job, then their contributions would stay assigned to them. In other words, the former employer would take no further part in their pension arrangements and only have to focus on those on their current payroll.

What Should Irish Businesses Do to Prepare?

There are four main things that Irish employers need to think about today so they are prepared for the commencement of auto-enrolment next year. The first is to address their payroll function. Some legacy payroll systems are simply not geared up for workplace pension schemes whether they are government-managed ones or not. Therefore, you should check with your financial teams or accountant whether now would be a good time to upgrade your system. Digital payroll services, like those provided by Snow, should not just be ready for the changing needs of a modern Irish economy but able to handle both current and future changes to pension arrangements in the workplace. Should the government change the way auto-enrolment works down the line, such as adjusting the age brackets or the qualifying earnings threshold, then your payroll system will need to be able to cope without being scrapped. In short, it is crucial that you ensure all of your payroll functions are future-proof.

Secondly, your human resources team may need to look closely at employee contracts. Workers who are on an outdated contract that, for example, states the employer has no responsibilities with regard to pension arrangements may find that such wording is no longer compliant with Irish law. Updating contracts so that they reflect the ramifications of auto-enrolment is important. You may need to seek independent legal advice in this area depending on how complex your employee contracts are. If necessary, you will need workers to sign new contracts that take into account their workplace pension provision.

Thirdly, employers have a responsibility to inform their workers of the changes and what auto-enrolment may mean for them. For one thing, it will mean they see a deduction on their payslips from January that they may not be expecting. This could affect anything from personal loan repayments to their choice of lifestyle so it is better that they are prepared. Note that your payroll system will need to show how auto-enrolment pension deductions are being calculated. In short, this means that such deductions will be made after pay-related social insurance (PRSI), universal social charge (USC) and income tax have already been levied. Auto-enrolment will affect employees take home pay from their usual net pay after these deductions so it is something they are likely to notice.

Finally, the financial impact of auto-enrolment won’t just be felt in employee’s payslips. Under the scheme, employers are required to match employee pension contributions up to a certain level. This means financial directors, managers and HR professionals will need to think about the consequent impact on cash flow on their business and to plan accordingly. Helpfully, the new arrangements are being phased in so companies should not hit a financial brick wall with more money going out than coming in. To begin with, Irish companies will have to match the contributions of every qualifying employee starting at 1.5% of their gross income. Over time, this proportion will increase, topping out at a maximum of 6%.

Auto-Enrolment and Time and Attendance in Summary

If you employ people based on the hours they work, such as assigning shift patterns or paying overtime for busy periods, then you will need accurate time and attendance records for your payroll runs to be in good order for auto-enrolment. That’s why not only digitising your payroll system but also updating your time tracking system is such a good idea before the scheme becomes mandatory in January.

Please note that Quantum Payroll is not only secure but communicates directly with the Revenue Online System (ROS) enabling convenient information uploads concerning all of the relevant payroll deductions including those related to pensions. To find out more about our time and attendance and payroll services, whether or not your company already has a workplace pension scheme or will be adopting the auto-enrolment system, please get in contact or book a free demonstration.

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