Auto enrolment and CMEC

Opera 3 (1.60) / Opera II (7.10)

This release incorporates the legislative changes resulting from the introduction of Auto Enrolment of Pensions and changes made by the Child Maintenance and Enforcement Commission with the introduction of a new type of Deduction from Earnings order (DEO).

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Take 10 minutes to watch the overview of Auto Enrolment video delivered by a Pegasus Product Specialist.  

Statutory Changes for October 2012 – Workplace Pensions Reform

From 1 October 2012, changes to the pensions law (the Workplace Pensions Reform) will start to affect employers. The changes mean that employers will have to enrol their employees into a pension scheme and pay into that scheme.

The date when the new law is ‘switched on’ for employers is known as the ‘staging date’. The staging date for employers varies according to the number of employees they employ. The earliest staging date is 1 October 2012 for the largest employers (those who employ 120,000 or more employees). Employers will then gradually be brought onboard (from the largest to the smallest) until approximately 2017 by which time all employers will be operating under the new legislation.

What are the requirements placed on employers?
Employers will have to automatically enrol eligible jobholders into a qualifying pension scheme and make an employer contribution towards it.

The main things employers must do are: 

• provide a qualifying pension scheme for their workers
• automatically enrol all eligible jobholders into the scheme
• pay employer contributions for eligible jobholders to the scheme
• tell all eligible jobholders that they have been automatically enrolled and they have the right to opt out if they want to do so
• register with Pensions Regulator and supply details of their qualifying scheme and the number of people they have automatically enrolled

What contributions will the employer have to make?
Eventually employers must contribute at least 3% of their worker’s earnings, although they can choose to pay more if they wish. The worker will be responsible for paying the rest. They will get tax relief on their contribution and the total combined contribution will eventually be a minimum of 8%

Do all workers need to be auto-enrolled into a pension scheme?
Auto-enrolment only applies to employees who are classed as eligible jobholders.
The category an employee falls into determines the duties to be applied to that employee by the employer:

• Eligible jobholder - aged between 22 and state pension age and has earnings? above the Auto-enrolment Threshold
• Non-eligible jobholder - aged between 16 and 74, has earnings? below Auto-enrolment Threshold but above the Qualifying Earnings Lower Threshold

Or

• Aged 16 to 21, or state pension age to 74, and has earnings* above the Auto-enrolment Threshold
• Entitled Worker - aged between 16 and 74 and has earnings? below the Qualifying Earnings Lower Threshold

Non-eligible jobholders are not Auto-enrolled, however these workers can opt into a qualifying pension scheme. In such circumstances both the employer and the employee will make contributions.

Further Information
For detailed information on these changes please see The Pensions Regulator website.
*Not all pay elements will be used in the calculation of earnings for auto-enrolment

Opera 3/Opera II will handle Work Place Pensions Reform (WPR). A summary of the changes are:

• The use of Auto Enrolment Processing will be optional. Opera 3 and Opera II customers will be gradually phased into WPR, so it will not be the case that all Opera 3 and Opera II customers will require Auto-enrolment Processing upon installation of this release
• Statutory Pensions Regulator Auto-enrolment settings will allow the various earnings thresholds for Auto-enrolment to be specified

• Employer specific Auto-enrolment details can be stored, such as their staging date
• It will be possible to define which Payment Profiles are to be included within the assessment of earnings for Auto-enrolment
• The employer will be able to define Auto-enrolment attributes at pension scheme level; for example: indicating whether the scheme should be used for Auto-enrolment or not
• A global Auto Enrolment Updates process will be provided to allow the employer to, for example, Auto-enrol multiple employees at the same time (possibly to be used on the employer’s staging date). The new process will also allow the employer to perform various other general Auto Enrolment  related updates on a global basis such as postponing a group of employees from Auto Enrolment

• The employer will be able to maintain Auto-enrolment details at an individual employee level; this includes the ability to Auto-enrol at an individual employee level. In addition Auto-enrolment options will be made available when a new employee is created (ie as an extension to the existing new starter process) to allow for immediate Auto-enrolment of a new starter
• The Calculation process will perform Auto-enrolment earnings assessment (for example: establishing whether the employee is an Eligible Jobholder, Non-Eligible Jobholder or an Entitled Worker). The Calculation process will also perform various associated validations; for example: if an employee is assessed as having become an Eligible Jobholder this period, but the employee has not yet been Auto-enrolled. Suitable warning will be given, it will then be the employer’s responsibility to Auto-enrol that employee
• Various Auto-enrolment related reports will be created. For example: a report of employees who have been Auto-enrolled this period, Pension Scheme Contributions
• Some reports will be amended to show automatic enrolment details : Employee Record Print, Employee Pensions etc. 

The employer will also be able to, for example:

• Define those employees who are to have a period of postponement applied to them (including the type of postponement to be applied, and how long the postponement will last)
• Define those employees who wish to opt-out, opt-in, join or cease active membership of a scheme
• Define those employees who fall outside of Auto-enrolment; for example: those already in a Qualifying Pension Scheme

Statutory Changes for October 2012 – Child Maintenance and Enforcement Commission (CMEC) introduction of a new Child Maintenance Deduction Order 

One of the aspects that CMEC (and the Child Support Agency (CSA) before them) oversees is the recovery of child maintenance payments from non-resident (absent) parents. Where a non-resident parent does not pay the child maintenance that is due from them, the unpaid child maintenance can be forcibly deducted from the parent’s earnings by their employer (ie via the Payroll); such forcible deductions are referred to as Deduction from Earnings Orders (DEOs).

From October 2012 CMEC will:

• Introduce a new child maintenance scheme; the new scheme will have its own type of DEO which in turn must be calculated (by the employer) in a different way to current DEOs
• Change the format of the associated ‘payment schedule report’ that an employer currently has to submit to CMEC/CSA
• Introduce an electronic ‘payment schedule report file upload facility’ (ie as an alternative to the current approach where the employer has to print off and post the paper report to CMEC/CSA)

What is the new DEO?

• This new CMEC DEO will be referred to as a ‘2012 DEO’
• A ‘2012 DEO’ will be calculated differently to the current CSA DEO types; specifically, the employee’s ‘protected earnings’ will be calculated as a ‘fixed percentage’ (60%) of their attachable earnings as opposed to being a ‘fixed amount’ as on previous DEO types

Changes to the DEO Payment Schedule Report
A new ‘DEO Payment Schedule Report’ was implemented within Opera 3 and Opera II in April 2011. CMEC have introduced changes to the layout and content of this report; for example: extra information must now be shown on the report, the number of ‘reasons for underpayment of a DEO’ have been reduced from two to one

New DEO Payment Schedule ‘File Upload Facility’

• From October 2012, CMEC will also introduce a new electronic ‘payment schedule report file upload facility’ (ie an online equivalent to the paper DEO payment schedule report). Where an employer files the report ‘online’ they will not then need to post a paper copy of the report to CMEC/CSA
• Opera 3 and Opera II will produce this electronic payment schedule report upload file that can be submitted to CMEC/CSA using their ‘file upload facility’

Other General Child Maintenance Changes

These changes do not affect the Opera 3 and Opera II software but will affect the way customers handle DEOs and are included in this section for completeness. These changes are:

• Currently an employer will pay over the DEO deductions (ie the money they have taken from employees pay) to a specific CSA bank account. At the point an employer starts to process their first new 2012 DEO, all DEO deductions (either for 2012 DEOs or for the older CSA DEOs) must be paid over to a new (different) bank account
• Currently an employer has to send the DEO payment schedule report to a specific postal address. At the point an employer starts to process their first new 2012 DEO, the payment schedule report (regardless of whether it includes 2012 DEOs or the older CSA DEOs) must be sent to a new (different) postal address

Note: the new bank account details and postal address have not yet been confirmed by CMEC.