How to Set Up Pension Auto-Enrolment for Your Business

What is Auto-Enrolment?

Workplace pension auto-enrolment is a UK legal requirement that obliges employers to automatically enrol eligible workers into a qualifying pension scheme and make contributions. It was introduced by the Pensions Act 2008 and applies to all employers, regardless of size.

Who Must Be Enrolled?

Workers fall into three categories:

Eligible Jobholders (must be auto-enrolled)

• Aged 22 to state pension age
• Earn more than £10,000 per year (or £833 per month / £192 per week)
• Work or ordinarily work in the UK

Non-Eligible Jobholders (can opt in)

• Aged 16-21 or state pension age to 74
• Earn more than £10,000 per year
• OR aged 22 to state pension age and earn between £6,240 and £10,000

These workers can ask to join, and the employer must make contributions if they opt in.

Entitled Workers (can join without employer contribution)

• Earn less than £6,240 per year
• Can ask to join the scheme but the employer does not have to contribute

Minimum Contribution Rates

Qualifying earnings for 2025/26 are earnings between £6,240 and £50,270 per year. Only earnings within this band attract mandatory contributions.

Step-by-Step Setup

Step 1: Know Your Duties Date

For new employers, your duties start from the day your first member of staff begins work. For existing employers, the staging date has already passed and duties are ongoing.

Step 2: Choose a Pension Scheme

Select a scheme that meets the qualifying criteria. Options include:

• NEST (National Employment Savings Trust): Government-backed, must accept all employers, no setup fees
• The People's Pension: Large master trust, competitive charges
• NOW: Pensions: Another major auto-enrolment provider
• Group personal pensions: From providers like Aviva, Scottish Widows, Royal London

The scheme must be registered with The Pensions Regulator.

Step 3: Assess Your Workers

For each worker, determine their category (eligible jobholder, non-eligible jobholder, or entitled worker) based on their age and earnings.

Step 4: Enrol Eligible Workers

• Write to each eligible jobholder within 6 weeks of their enrolment date
• The letter must explain the scheme, contribution rates, their right to opt out, and tax relief
• Set up payroll deductions

Step 5: Process Opt-Outs

• Workers have a one-month opt-out window from the date they are enrolled (or the date they receive the enrolment letter, if later)
• If they opt out within this window, you must refund all contributions
• You cannot encourage or incentivise opting out

Step 6: Pay Contributions

• Contributions must be paid to the pension provider by the 22nd of the month following deduction (or 19th if paying by cheque)
• Late payments trigger a compliance notice from The Pensions Regulator

Step 7: Re-Enrolment

• Every 3 years from your staging date, you must re-enrol eligible workers who previously opted out
• You can choose a date within a 6-month window around your re-enrolment date
• After re-enrolment, workers have another opt-out window

Step 8: Complete Your Declaration of Compliance

• Submit to The Pensions Regulator within 5 months of your duties start date
• Must be completed even if you have no eligible workers

Penalties for Non-Compliance

How Grove HR Helps

Grove HR tracks worker eligibility automatically based on age and earnings, generates enrolment letters, monitors opt-out windows, sends re-enrolment reminders at the 3-year mark, and integrates pension deductions into payroll preparation.