Nearly half of the small businesses in the UK without a workplace pension scheme in place are still unclear about their responsibilities, according to the Federation of Small Businesses (FSB).
Forty-five per cent of the small business owners surveyed said they were not sure about what they had to do, and 25% are not confident that their business will cope.
Although smaller firms generally believe ‘auto-enrolment’ will be good for their staff and that workers should save for the future, three in four business owners (76%) said auto-enrolment pensions put too much pressure on businesses like theirs.
Over the next two years, more than a million small and micro businesses will have to set up a workplace pensions for their employees under government rules. January sees the number of employers reaching their designated staging date - the date by which they need to start complying with auto-enrolment - rapidly ramp up with tens of thousands 'staging' each month during 2016 and 2017.
Although the majority of businesses (51%) feel confident they can meet the challenge of the new workplace pension, 45% of businesses which have not yet complied are unclear what they need to do, and one in four (26%) do not know their staging date.
The FSB also found businesses underestimating the costs of implementing auto-enrolment. On average, smaller businesses still to start the process, expect overall costs to be approximately £903. However, firms which have already introduced a workplace pension reported average overall costs of £1436, with one in five business (19%) reporting costs upwards of £2000. Although costs are likely to be higher for firms with more than 50 employees, the findings suggest that the smallest businesses could be underestimating the costs too.
When asked how they accommodated the cost of setting up a workplace pension, 70% of businesses which had already done so said they absorbed the expense into general operating costs or accepted lower profits. However, a fifth (21%) said they had frozen or reduced wages in order to cover the cost of auto-enrolment.
Those firms yet to start auto-enrolment said they were more likely to be planning a wage freeze or cuts in response, with 30% expecting to do so. This suggests that as the rollout reaches greater numbers of businesses, this could act as a further drag on pay growth as employers look to manage increasing costs.
John Allan, national chair of the Federation of Small Businesses (FSB), said: "Our message for small employers is auto-enrolment is coming and will affect your business - and the sooner you get to grips with what you need to do, the better off you will be.
"Most of the businesses which have already set up a workplace pension told us they found the process fairly straightforward, but we know many remain concerned about their ability to cope. These businesses should feel reassured that there is plenty of information and support available to help them through this process, both through the FSB and from the Pensions Regulator."