By Jonathan Dowden, Pensions Expert at Sage UK
Automatic Enrolment is Pensions Minister Steve Webb’s “quiet revolution”. However, things may not be so “quiet” for businesses in the coming months.
Attitudes towards saving for our future are changing, and Mr Webb will be happy with the staging results of larger organisations – opt-out rates are better than predicted and the process has been relatively smooth so far.
What hasn’t been talked about enough is the impact on small firms. The success of his flagship policy needs to be measured against how well the hundreds of thousands of small and medium enterprises (SMEs) yet to stage, are able to navigate this change.
Larger firms, with bigger HR departments and more staff running payroll, are better placed and better equipped to implement the changes. However, for a smaller business, the sight of auto enrolment on the horizon presents an administrative headache.
For 720,000 firms this will be the first time they will have offered a workplace pension scheme – a fundamental change.
Yet, with the economy now showing signs of recovery, many bosses are understandably keeping a tight grip on the purse strings, with only a small fraction planning on bringing in any new staff to help implement auto enrolment. Our Omnibus survey of more than 500 Sage customers found 97 per cent would not be hiring additional resource despite the increase in admin.
A study by the Centre for Economics and Business Research (Cebr), commissioned by Creative Auto Enrolment, found businesses with up to 100 employees will face an average set-up cost of £12,600. On top of this, firms will have to complete 33 administrative tasks, taking an average of 103 man days to complete.
This presents a challenge – smaller businesses do not have the same staffing resource as larger firms, and yet they have to overcome the same tricky legislative hurdle or they will have to count the cost of non-compliance. Although I think the authorities will apply a common-sense approach, firms could be fined up to £10,000 a day if they are not up to speed when their staging date is upon them.
Rather than worrying about admin and payroll, business owners want to focus on the things that matters to them the most – actually running their business.
This may seem daunting, but with the technology and support that exists today SMEs don’t need to be lumbered with the added burden. The approach we’re advising people is to take control through education and preparation.
Software can do all the heavy lifting through payroll and pensions administration solutions, but these are two separate business processes creating twice the work for the employer.
Success for a business is being able to bring pensions and payroll into one entity. The magic happens when the two integrate so seamlessly the payroll process does not miss a beat, turning a very complicated process into something very simple
We want to make auto enrolment as simple and pain free as possible. As well as taking away the headache of added admin, keep the cost of implementing AE to a minimum. Firms will not have to fork out for potentially costly and ineffective middleware, and there are savings to be made in staff time because the process is so streamlined.
Sage 50 Payroll Automatic Enrolment Edition and the Sage Pensions Module have been created to put small businesses in control of their auto enrolment preparation, providing all the information they need for a seamless and stress free move to fulfilling their new responsibilities in just a few clicks.
Auto enrolment does not have to be a mammoth task for firms – the help and support is out there, and software will help them through this change.