By Roger Sanders OBE, Managing Director of Lighthouse Group Employee Benefits

We are now reaching crunch time for the government’s pensions auto-enrolment scheme, with 97 per cent of businesses still to complete their enrolment. Most of these are small, owner-managed businesses with fewer than 50 employees, usually lacking HR departments or in-house payroll expertise, or with the owners having little time to deal with yet more administration.

Below are five top tips to help busy SME leaders tackle their auto-enrolment requirements and ensure they avoid the hefty fines that await those who miss their deadlines.

1. Find out your staging date and start preparing

Setting up a workplace pension takes longer than you think, and you should start the process 12 months before your staging date. Smaller employers can actually find it more difficult as many providers want to focus on larger, more profitable firms.

Once a suitable scheme is chosen you will need time to get the mechanics of it up and running smoothly. This includes working out which employees to enrol, how much both you and they have to pay into the scheme, and how much the government will contribute. This must be aligned with your payroll system and pension provider’s system.

You must also budget to pay the on-going monthly employer contributions to your employees’ pensions, and your provider may charge an administrative fee for setting up and managing your scheme.

Your staging date can be found at http://www.thepensionsregulator.gov.uk/employers/staging-date.aspx by entering your PAYE reference.

2. Assess your workforce at least six months before your staging date

Only employees who meet certain criteria must be enrolled automatically. Others must be invited to join the scheme, or can request it themselves. The selection criteria are based on a person’s age and earnings. You must have completed this assessment before your staging date. You also need to check whether any contractors or agency staff you use fall within the scope of your auto-enrolment requirements. Company directors must also be assessed.

Employee information such as age, date of birth, national insurance number, address and contact details should be re-verified. Some of the modern workplace pension schemes integrate with the most commonly-used payroll packages, making auto-enrolment management a lot easier if a mainstream software package is used.

You must also reassess your workforce regularly to ensure that any staff who leave, or join, the company, or any employees who change categories are dealt with correctly.

3. Choose a scheme that is modern, robust and flexible

Start by looking at the new breed of low-cost, flexible pension master trusts set up specifically to meet auto-enrolment requirements. These schemes take advantage of up-to-date technology and are adaptable enough to meet future legislative requirements.

Your choice will be influenced by factors including the choice of investment options available, whether the scheme offers different contribution levels for different categories of employees and whether it imposes an upper contributions limit. It should meet the latest standards in terms of governance and independence, and is as cost-effective as possible.

Many businesses prefer a scheme that can be set up and run with minimum involvement from them.

Choosing a provider that integrates with your payroll system is a must, with some offering a complete set-up service and others requiring the legwork to be done by your company.

Existing company schemes are not necessary compliant with the new requirements, so check how it fits with auto-enrolment.

4. Use auto-enrolment as an opportunity to boost employee loyalty

As an employer you have a statutory duty to send certain information about auto-enrolment and your workplace pension to your staff. For instance you must write to each member of staff within the six weeks following your staging date telling them about your workplace pension, how automatic enrolment applies to them and explaining their rights. You must tell them about the contributions being deducted from their pay. Such statutory communications can be sent out automatically using the functionality built into many of the modern workplace pensions.

However, auto-enrolment is an opportunity for you, as an employer, to create a feel-good factor among your staff, especially if you choose a scheme that offers more than the basic requirements. Emphasise that you chose a scheme for its flexibility and accessibility, or because it includes investment options, for example.

Smaller employers providing employees with benefits for the first time should consider further benefits such as death-in-service, and life insurance, which really does help with recruiting and retaining staff.

5. Get your on-going processes right – choose a provider who sets up your scheme for you

Auto-enrolment is essentially process-driven – from providing a main contact to the Pensions Regulator, to regularly reassessing staff. None of these items is complicated in itself, but doing each accurately relies on having the correct information available, in the appropriate format, and in a timely fashion.

The more processes that can be automated the better, and many smaller employers are going a step further and choosing a workplace pension provider who does the work for them. Online portals provide access to employee information and contribution levels once the set-up is complete, and members can also view their individual accounts online.

Some providers offer full support not only during set-up but on an on-going basis. Ensure your provider has a UK-based admin team that gives you a named administrative contact. Being offered a local consultant to help with information gathering and telling employees about your scheme is also important.