Over half (52%) of startups and small businesses say they are not confident their business will be ready to offer the auto enrolment pension scheme within the government deadline, according to new research.
Business plaftorm Geniac said small and medium-sized enterprises run the risk of fines and added costs if they do not act soon.
The Pensions Regulator estimates that over 570,000 small businesses will stage for auto enrolment over the coming 12 monthsmeaning they will have to provide a workplace pension for eligible staff by 2018, with most needing to do so by April 2017.
While fees can reach up to £1000 for advice on auto enrolment for small employers (excluding time taken and payroll setup expenses) the fines for non-compliance are far greater, potentially reaching £500 per day for some small businesses.
These additional costs come at a time when small business owners are already stretched due to underestimating running costs in their business. The research found that the average startup currently invests £22,756 in its first year to cover essential business administration costs, including accountancy, company formation, HR and legal services. Yet those thinking of starting a business underestimate these expenses by £2,525 on average.
Failing to tackle auto enrolment could compound the issue of small businesses being hit with unexpected costs – with a myriad of consequences. Nearly two-thirds (64%) of small business owners say that unexpected costs have caused serious business issues including: experiencing profit losses (23%); being forced to readjust growth targets (21%); and having to let staff go to free up funds (7%).
Mike Galvin, co-founder of Geniac, said: “The fact that over half of small businesses are unprepared for auto enrolment should ring alarm bells. Entrepreneurs must avoid sleepwalking up to the deadline as this could cost them dearly, particularly fledgling companies with limited budgets.
“Thousands of business owners are simply in the dark over how to handle this major administrative change, or are putting off sorting it because of the time involved. To avoid unexpected penalties, business owners should seek professional advice to get ready by the deadline. One of the most cost-effective ways to do this is to take advantage of online business platforms which can help you through the entire process at a fraction of the cost.”