Auto-enrolment pensions for salons & where to get help
Have you got to grips with the new auto-enrolment pension regulations yet?
As the owner of a hair or beauty salon it may seem like yet another ‘thing’ you’ve got to sort out.
Yet more red tape.
As if you haven’t got enough to do.
“But”, I hear you say, “ I’ve asked my employees and they don’t want a salon pension scheme, so I presumably I can forget about it?”
No you can’t. Under the new law, every hair or beauty business employer must offer a qualifying pension scheme even if no-one takes it up.
In this blog post I am:
- Over viewing your auto-enrolment pension obligations as a salon owner
- Looking at the NHF pension scheme set up exclusively for hair & beauty salons (now open to non-NHF members too).
So what exactly is auto-enrolment pension and what must I do as the salon owner?
There’s plenty of detailed information out there about the new pension legislation and how it will affect your hair or beauty business. But if diving straight into this mountain of detail seems too daunting here’s a simple overview to get you started.
As an employer myself, I admit it all seemed rather overwhelming at first glance. All I can say is that if you put aside an hour or so to do some reading you’ll find plenty of help and information available online. I’ve listed the website links I personally found most useful later in this post.
However, you don’t have to delve too deeply into the nitty gritty as the National Hairdressers’ Federation (NHF) have done a very thorough job of putting together a scheme exclusively for hair and beauty salon owners. I take a good look at this later in this blog post. And to avoid any misunderstanding – no, I’m not on any commission.
A simple overview of the new Workplace Pension Reform for salon owners
The Pensions Act 2008 introduced new legislation requiring employers to enrol all eligible staff on a compliant pension scheme and help create a savings culture in the UK. It goes by the catchy names of Workplace Pension Reform or automatic-enrolment pensions. They are one and the same thing.
The new legislation was rolled out to larger employers initially. More recently smaller businesses are receiving their ‘staging notice’ (I explain this notice later in case you’ve not yet received yours).
Your auto-enrolment pension duties as a hair or beauty business owner
The Pensions Act 2008 introduced new pension duties for employers. If your salon or spa employs one or more people then these changes affect you.
You have to take action. It’s not something you, as the business owner, can opt out of. Every employer in the UK will have to offer their employees a workplace pension scheme that meets certain minimum standards.
1. As a salon owner what must I do to comply?
In a nutshell, you’ll need to:
- set up a workplace pension scheme for your salon business and
- pay a minimum level of pension contributions on your employees’ behalf.
But your obligations don’t stop at just setting up a qualifying pension scheme and enrolling your employees.
Automatic-enrolment is an on-going responsibility (and another admin task) for salon business owners. Among other things, you’ll have to manage your scheme including assessing your team every pay period to ensure they’re getting the right contributions, deal with new employee enrolments and opt-outs and keep records of how you have complied with your automatic enrolment pension duties.
2. When will my salon business be affected?
The new pension legislation came into force in 2012, starting with larger companies. It is currently being rolled out to medium and small companies and by 2018 all UK companies with one or more employees will need to implement auto enrolment.
Every employer has a date by which they must be ready to comply with their new workplace pension duties. This is called a ‘staging date.’ You can find out your staging date here – you will need your PAYE number to hand.
3. How much do I need to contribute to my employees’ pensions?
As I’m sure you suspected or knew there is, of course, a financial impact for your salon business.
Under the new regulations, both employers and employees need to make a minimum level of pension contributions to the scheme.
Employee pension contributions: You will need to deduct your employee’s contributions and make sure you pay them on time on their behalf. Just like National Insurance deductions.
Employer pension contributions: You’ll also need to make a minimum contribution for any salon employee who earns more than the qualifying earnings threshold (£5824 in tax year 2015/16). The minimum will be 3% from 2018.
Many commentators are glossing over the undoubtedly tricky aspects of keeping your team happy, as they are going to have to dig into their pockets too. Clearly it’s sensible for us as a nation to make better formal pension provision for the future. However, most of us don’t relish spelling out the financial implications to our team. I’ll be looking at this ‘internal marketing’ challenge over the coming weeks in this blog.
Who offers auto-enrolment pension schemes?
Just the thought of all that extra admin time, set up costs and on-going contributions may be giving you a headache. Where to start?
There is help on tap from a number of sources to get your salon registered on a qualifying pension scheme. For example you could:
- Speak to your financial advisor for their recommendations.
- Register with the NEST (set up by the government especially for auto enrolment pensions and free for employers to use).
- Register for the National Hairdressers’ Federation scheme (open to beauty salons too).
Why the NHF auto-enrolment scheme looks a good option
The Federation has a long track record of providing reliable trusted employment advice to hair and beauty salons. They understand our industry inside out, and have clearly worked hard to find a pension scheme that makes complying with this new legislation simple and easy for salon owners.
Looking at their scheme it seems:
- They guarantee acceptance for all hair, barber and beauty salons.
- Fortunately you don’t have to be a NHF member to use it.
- You get easy-to-use software to administer the scheme at no extra charge.
- As you’d expect from the NHF there is a free auto-enrolment helpline.
- It seems reasonably priced, although NEST offers a free service to employers.
Costs of NHF auto-enrolment scheme
MEMBERS: £295 + VAT one off registration fee to set up your scheme. Annual governance fee £65 + vat.
Special offer until 31st August 2015 only £195 + vat registration fee.
NON-MEMBERS: £395 + vat one off registration fee to set up your scheme. Annual governance fee £105 + vat.
Historically, offering a pension within hairdressing, barbering and beauty has been the exception rather than the norm. That’s now all changing, and fast, as every business with even one eligible employee needs to put a pension scheme in place by 2018 at the latest.
The NHF pension isn’t the only solution out there but it’s the only one specifically designed for our industry. Members told us that as well as being cost-effective, the pension scheme had to be easy to operate. We’ve not only made sure it will work with any payroll system, but we’ve provided free videos and tools for business owners to use on our dedicated pensions website. And it’s backed up by a telephone help line so there’s help whenever you need it.”
– Hilary Hall, CEO, National Hairdressers’ Federation
Useful auto-enrolment advice for hair & beauty salon businesses
The Pensions Regulator has clear detailed information for salon owners covering every stage from getting started to managing your scheme under their Employer section.
NEST (National Employment Savings Trust) is the workplace pension set up by the government and is free for employers.
Auto-enrolment pensions affect every salon and spa
It can seem like minefield at first glance, but, like it or not every salon and spa owner is going to have to comply with the new legislation. You have no choice. You do however have a choice on where you go to get help.