This year, over 500,000 small employers (those with fewer than 50 staff) will be affected by auto enrolment and, by law, they will have to automatically enrol their eligible employees into a workplace pension and make contributions to that pension. This compares to just 47,000 in 2015.
For anyone who runs a small business, auto enrolment can feel daunting. Smaller employers tend to have little or no experience of pensions, they don’t have the dedicated in-house resource that larger companies enjoy, nor do they necessarily have the support of an expert adviser. The key is to tackle it early and plan.
Here are our five top tips for employers approaching auto enrolment:
- Plan ahead and prepare
Leaving auto enrolment to the last minute will inevitably result in increased administrative pressure and unnecessary stress. The simple truth is the longer businesses allow themselves to implement the changes, the easier the process will be.
- Include auto enrolment in your budget forecasting
Initially, contribution levels are set quite low. But by 2019, employers must pay a minimum of 3% of qualifying earnings per employee into a pension scheme.
- Think carefully about scheme selection
Good quality schemes should be able to demonstrate their quality through third party assessments such as The Pension Regulator’s master trust assurance framework or Pension Quality Mark, these are designed to highlight schemes that are well governed with low charges and good member communications.
- Think about your contribution structure
Over half (57%) of those surveyed who intend to pay more than the minimum say they believe it will help with the recruitment and retention of employees.
This approach makes sense as behind holiday entitlement, generous pension contributions are the most highly rated benefit cited by employees.
- Harness the power of payroll
Professionalising your payroll ahead of introducing auto enrolment is wise and the benefits shouldn’t be under estimated. One of the biggest stumbling blocks for all firms tackling auto enrolment is ensuring all payroll data is complete and up to date. A missing date of birth or national insurance number can cause untold problems further down the line.
Auto enrolment is complex and there are lots of things to consider. But, tackle it early and there’s little to fear.
By Morten Nilsson, CEO of NOW: Pensions