If you employ people in your salon or barbershop the law says you must provide a workplace pension. This will help your employees save for their retirement. But what’s involved?
This blog post covers:
- Who is an employer?
- Which employees are eligible?
- How much has to be paid in?
- How are contributions paid?
- How to manage a workplace pension
- Workplace pension providers
- What about chair and room renters?
- Checklist
Minimum contributions from April 2019
From 6 April 2019, the minimum contributions you and your staff must pay into your workplace pension scheme will increase. (There are exceptions: find out more in our in-depth guide)
| Date | Employer minimum contribution | Staff contribution | Total minimum contribution |
|---|---|---|---|
| New rate: 6 April 2019 onwards | 3% | 5% | 8% |
| Previous rate: until 5 April 2019 | 2% | 3% | 5% |
By law, a total minimum amount of contributions must be paid into the scheme (8% from 6 April 2019). Employers must make the minimum employer contribution towards this amount (3% from 6 April 2019) although they can pay more if they wish. Staff members must then make up the difference.
If employers decide to cover the total minimum contribution required (8% from 6 April 2019), staff won’t need to pay anything.
More information is available on The Pensions Regulator website.
The workplace pensions guide provides in-depth information and advice about workplace pensions and what you need to do. It’s available to Members and non-members.
Who is an employer?
If you pay someone on a regular basis and deduct tax and National Insurance from their wages you are almost certainly an employer and should be providing a workplace pension scheme in your salon or barbershop.
Which employees are eligible?
You must automatically enrol employees in your workplace pension scheme and pay contributions towards their pension if they:
• are aged between 22 and State Pension age;
• earn at least £10,000 a year; and
• usually work in the UK.
Even if an eligible salon or barbershop employee says they don’t want to join the scheme you will still have to automatically enrol them. They then have the right to leave (opt out’) the workplace pension scheme.
But don’t forget: you must re-enrol opted-out employees every three years. They can then opt out again if they wish.
Pension re-enrolment
The law says that every three years you must:
- Re-enrol certain members of staff in your workplace pension scheme.
- Tell The Pensions Regulator that you have completed your pension duties.
How much has to be paid into a workplace pension scheme?
By law, a total minimum amount of contributions must be paid into the scheme (8% of qualifying earnings from 6 April 2019). Employers must make the minimum employer contribution of 3% from 6 April 2019.
There are exceptions (find out more in our in-depth guide), but generally speaking the employee must pay:
• From April 2019, 5% of their ‘qualifying earnings’. In the tax year starting 6 April 2021, ‘qualifying earnings’ are between £6,240 and £50,270 a year before tax. This amount includes payments such as bonuses, Statutory Sick Pay and Maternity/Paternity Pay.
Employers can pay more than the minimum if they wish. Staff members must then make up the difference.
If employers decide to cover the total minimum contribution required (8% from 6 April 2019), staff won’t need to pay anything.
How are contributions paid?
You must pay your contribution for each of your employees by the date you agree with your workplace pension provider. You may be fined if you pay late or don’t pay.You are responsible for deducting your salon or barbershop employees’ contributions direct from their salary each month.
The business finances, prices, wages and profits guide will help you understand the basics of financial management for your business including tax, VAT, accounting and record keeping. It’s available to NHBF Members only. Not yet a Member? Join today.
How to manage a workplace pension
You will probably need the help of a payroll company or accountant to run your workplace pension scheme. They will carry out key administrative tasks including managing contributions, keeping track of members, dealing with enquiries and making sure your scheme complies with a range of complex regulations.
Find out more about taking on an accountant.
Workplace pension providers
Most salons and barbershops will want a reliable low-cost option. There are many workplace pension providers, but you may wish to consider one of the following:
Salvus Master Trust: Salvus Master Trust offers a workplace pension scheme to NHBF Members and non-members. It is designed as a self-service scheme to be managed via the website.
NEST: This is a workplace pension scheme set up by the government. It aims to make pensions as simple as possible for employers and can be managed online.
The People’s Pension: This is provided by the not-for-profit organisation B&CE which aims to offer simple financial products.
Chair and room renters
Chair and room renters are self-employed. They are not employed by the salon or barbershop and so do not have to be enrolled in a workplace pension scheme.However, it’s vital for self-employed stylists, beauty therapists and barbers to sort out their own pension arrangements so they have enough money to live on when they retire.
Going self-employed? Find out if chair, space or room renting is for you.
Checklist
- If you employ staff in your salon or barbershop you must provide a workplace pension scheme.
- You’ll probably need a qualified financial expert to help you with the day-to-day running of the scheme.
- All eligible staff must be enrolled – even if they don’t want to join.
- Staff who don’t want to join can then opt out.
- You must re-enrol staff every three years (they can opt out again if they wish).
- There are minimum amounts you and your staff must pay in to the scheme.
Join the NHBF
As a Member you’ll benefit from:
- Our friendly membership helpline for everyday business support.
- Free 24/7 legal and commercial helpline.
- Essential health & safety kits.
- Free Member-only in-depth guides about all aspects of running your business.
- Savings and discounts on business essentials including insurance.