Taking on your first employee is a milestone — and it quietly makes you a pension provider. The moment someone starts working for you, workplace pension (auto-enrolment) duties apply, and there is no opt-out for the employer. The rules are administered by The Pensions Regulator, and while none of the individual steps is hard, missing the deadlines can lead to enforcement action. Here is what you actually have to do.
Your duties start on day one
A common myth is that auto-enrolment only kicks in once a business is a certain size, or after a settling-in period. It does not. Your legal duties begin on the day your first member of staff starts — this is your duties start date, and everything else is measured from it.
That means you cannot decide to "sort the pension out later." Even if it turns out you have no one to enrol, you still have duties to assess your staff and to tell The Pensions Regulator what you have done.
Assessing your new starter
The first practical job is to work out which category your employee falls into, because that determines what you must do for them. Assessment is based on their age and how much they earn, and it generally sorts staff into three groups:
- Those you must automatically enrol — typically workers within a certain age band who earn above an earnings trigger. You must put these employees into a scheme and pay contributions for them.
- Those who can ask to opt in — for example, some lower earners. You do not have to enrol them automatically, but if they ask to join, you must let them, and in some cases contribute.
- Those who can join but you need not contribute — the youngest or lowest earners, who still have a right to join a scheme.
The exact age boundaries and the earnings figures that separate these groups are set by the government and change from time to time, so check the current HMRC or Pensions Regulator figures — or ask us — rather than relying on last year's numbers.
Choosing a pension scheme
If you have anyone to enrol, you need a qualifying pension scheme set up and ready before your duties start date. When you are choosing one, look at:
- Whether it will accept a small or single-employee business — not all schemes do, and some are built specifically for smaller employers.
- How well it integrates with your payroll software, because contributions have to flow through every pay run.
- Cost and charges, both to you and to the member.
- How easy it is to administer month to month, since this is a recurring job, not a one-off.
Several providers are set up to make this straightforward for first-time employers. The key is to have the scheme in place in good time, not scrambling in the employee's first week.
Paying the right contributions
Once someone is enrolled, both you and the employee pay in. There is a minimum total contribution, split between an employer share and an employee share, calculated on a defined band of the employee's earnings.
- You must pay at least the employer minimum.
- The employee's contribution is deducted through payroll.
- You can choose to pay more than the minimum if you wish, but not less.
Because the minimum percentages and the earnings band they apply to are set nationally and can change, always confirm the current figures with HMRC or The Pensions Regulator before running your first calculation.
Telling your employee
You must write to each member of staff to explain how auto-enrolment affects them — what is happening, what it means for their pay, and their right to opt out if they choose. This communication has to go out within a set window after your duties start date.
These letters are not optional courtesy notes; they are a legal requirement, and most pension providers and payroll systems can generate compliant templates for you, which saves a lot of time.
The declaration of compliance
This is the step first-time employers most often forget. After you have assessed your staff and set up any scheme, you must submit a declaration of compliance to The Pensions Regulator, confirming what you have done. It has a firm deadline measured from your duties start date — not from whenever you get round to it — and missing it is a common trigger for enforcement contact.
Even if you had no one to enrol, you still need to tell the Regulator that, so the declaration applies to virtually every new employer.
Ongoing duties: it does not stop after setup
Auto-enrolment is not a one-and-done task. Once you are up and running you must:
- Assess new starters and existing staff each pay period, in case someone's age or earnings now bring them into a category that must be enrolled.
- Keep paying and recording contributions through every payroll run.
- Handle opt-outs and opt-ins correctly and within the time limits.
- Re-enrol eligible staff periodically — roughly every few years you must put back in anyone who previously opted out and still qualifies, and complete a re-declaration of compliance.
- Keep records of what you did and when.
The practical next step
The safest way to handle all of this is to line up your payroll and pension scheme together, before your first employee's start date, so assessment, contributions and communications all flow automatically. That turns an intimidating legal duty into a routine part of running payroll.
If you would like us to set up your workplace pension alongside your payroll, handle the assessments and communications, and make sure your declaration of compliance is filed on time, ask us for a quote and we will take care of the setup for you.