Under auto-enrolment rules, most employers are legally obliged to provide an employee pension scheme and to make contributions to it.
Although this is a cost to the business, there are also benefits. Providing attractive pensions for your employees can help your business recruit and retain staff. The tax relief on pension contributions makes this a good way for employees to save towards their retirement.
Employer pension rules
Auto-enrolment means that most businesses are required to have a pension scheme that meets set requirements. As well as setting up the scheme, you need to automatically enrol employees in it. Some younger or lower paid workers are not automatically included, but can opt to join the scheme.
As the employer, you must make employer contributions that at least match the legally required level. Depending on how generous your contributions are, the employees may also need to make contributions. The required contribution levels are gradually rising until April 2019.
You should be ready to answer employees' questions about auto-enrolment, so they understand how the scheme works and their right to opt out if they want to. But you're not allowed to provide financial advice or encourage employees to opt out.
Choosing an employee pension scheme
You may already have a pension scheme for your employees. If it meets the auto-enrolment requirements, you can continue to use it. You should check with your pension scheme provider.
You can also choose to set up a new pension scheme, using the NEST scheme set up by the government or another provider. You may want to get expert advice to help with choosing a staff pension scheme.
It's up to you to decide how high you want employer contributions to be (provided they are at least the legal minimum). Your payroll system will need to deal with paying employer and employee pension contributions to your chosen provider.