The introduction of automatic enrolment in Ireland will be delayed until at least 2023. The scheme's purpose is for workers to supplement their state pension as a shocking 40% of private sectors workers rely solely on the state pension to fund their retirement. This will mean by law, that employers will have to enrol their employees in a workplace pension scheme. Auto enrolment was supposed to be introduced at the beginning of 2021. It’s now looking like it will be rolled out in 2023, but it could be extended yet again as the full details for auto enrolment are still being ironed out by the government.
During the phased roll out of auto enrolment, employees will be required to make initial minimum default pension contributions of 1.5% of their qualifying earnings, increasing by 1.5 percentage points every 3 years thereafter to a maximum contribution of 6% at the beginning of year 10.
Employers will be required to make matching (tax deductible) pension contributions on behalf of the employee at the specified contribution rate to help fund their retirement. This means that employees, employers and the State will each contribute to the member’s account.
Employees between the ages of 23 and 60 who earn €20,000 or more per annum (across all employments) will be automatically enrolled into a pension scheme with no waiting period. All employees outside of these criteria may opt in themselves. Mandatory auto enrolment requirements won’t apply to any employee who is already a member of a pension scheme, provided the scheme meets certain minimum standards. Automatic enrolment will be an earnings-related workplace savings system where employees will retain the freedom to opt out if they wish.
It's important that employers understand what they need to do and prepare early. Employers should educate themselves on auto enrolment and familiarise themselves with the terminology. Businesses may need to think about one-off costs to set up an auto enrolment pension scheme, as well as the ongoing cost of paying money into the scheme and managing the process.
If you are a new business and employing staff for the first time after auto enrolment is introduced, your legal duties for automatic enrolment will begin on the day your first member of staff starts work. There will be guidance and support available to ensure that businesses comply with auto enrolment.
If you’re fortunate enough to use a good payroll software then this will handle and automate the administrative duties for you. With Thesaurus Payroll Manager, there will be no additional charge for any of the auto enrolment features. All of this will be included as part of your payroll software package, which also includes free customer phone and email support.
At Thesaurus Software, we already experienced the rollout of auto enrolment in the UK, with our UK payroll product, BrightPay. Auto enrolment phased in at the beginning of October 2012, starting with the larger UK companies. Every company in the UK enrolled employees into a pension scheme by 1st February 2018. BrightPay UK introduced auto enrolment features which enabled users to automate and simplify the entire process, so we are already experts in the field and well prepared for the rollout in Ireland.
The extension of auto enrolment beyond 2023 looks very possible as the target market for auto enrolment is younger, lower-paid workers in sectors such as Wholesale and Retail Trade, Accommodation and Food Services, Construction and Industry. These sectors have been worst affected by the COVID-19 pandemic. Adding an extra cost to these employers and employees who have been living off the pandemic unemployment payment (PUP) for the past year, to suddenly start paying into a pension fund, seems unfair and unlikely.