By Daniel Hunter

In one of the first major surveys since the introduction of auto-enrolment in October 2012, the Institute of Directors reveals a significant increase in awareness among employers. However, many businesses say that the new contributions will hit their profits, with some being forced to cut or freeze salaries.

Key findings:

- 98% said they were aware of the requirement to automatically enrol nearly all staff onto a pension scheme to which the employer had to contribute. This is a large rise compared to the last time we asked the question in 2011, when 20% said they were not aware of the legislation.

- Auto-enrolment is being introduced in stages, affecting the smallest employers by 2017. Three-fifths (62%) of businesses said they were confident that they were prepared to enrol their staff when they hit their staging date, compared to 15% who were unconfident. Preparedness varied by size of business: 79% of directors of large companies (250+ employees) said they were confident, while only 54% of those from small firms (0-49 employees) said the same.

- In 2011, 36% of businesses thought that more than a third of their staff would choose not to enrol in the workplace pension scheme; by 2013, only 15% of business still thought so. There remains significant uncertainty for small firms, however, with over a third (36%) saying they did not know how many of their staff would choose to opt-out.

- Auto-enrolment imposes a new charge on employers through the pension contributions, which will affect their profitability. Two-fifths (42%) of businesses said that they would have to meet the contributions out of their profits. A fifth (21%) said they would have to freeze or cut salaries to find the money, and 3% reported that they would be forced to make redundancies.

"Auto-enrolment is a new challenge for business, both in terms of costs and logistics. It's positive that nearly all businesses know that they will have to set up a pension scheme for staff over the next few years, and that most feel ready for it," Malcolm Small, Senior Pensions Policy Adviser at the IoD, said.

"However, we still don't know how small firms are going to handle the burden - nearly half still feel unsure about the process, and many don't know if their staff are going to drop out."

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