By Ricky Clark of Henderson Loggie
We have now entered into the small to medium sized business market, with auto enrolment compulsory for companies having between 50 and 249 members of staff as at 1st April 2014. They must introduce auto enrolment by 30 March 2015.
An immediate issue to account for is the employer’s cost and time. A properly prepared budget is essential to enable planning for future and present costs. On the positive side, some companies may look at the pension scheme as a good way to reward their staff and retain quality employees over the long term.
Many employers have found trading difficult in the last few years and margins are tight. The questions they will want answers for is how to fund for a pension contribution. Implementing auto enrolment does not only involve a monetary pension contribution, but also time and resource, and especially that of key employees within a firm.
The pension contribution is a known factor once some high level decisions have been made, but there are ways of employers mitigating these costs, including the use of salary exchange. The national insurance contribution savings to the employer can be significant and can help cover the cost of pension contributions.
The time and resource cost is often an unknown element, but we have found that preparation is key. Small employers often rely on one person and, as result, they do not have the time or capacity to apply the required changes to adhere to new pension legislation. There will be a cost issue for many employers due to the time required to plan, liaise with software providers and research the best solution for their employees. It is becoming increasingly clear that a significant number of companies would rather outsource this work to an appropriate financial adviser/pension scheme provider.
Companies can help themselves though by, firstly, sourcing their staging date using their PAYE reference number. This can be done very simply via The Pension Regulator site. This will enable them to gauge how long they have to prepare. Then, establishing a strategic plan is essential so the company leaders can review those areas of their business that are an integral part of enabling them to meet their auto-enrolment duties.
We have already experienced many employers leaving their preparation for auto-enrolment too late and this continues to be a concern moving forward. Over the next 12-18 months the numbers of employers due to stage will increase exponentially. Therefore, not only the resources of providers but the resources of advisers that can assist in the advice and project planning of a company’s duties will be stretched.