By Marcus Leach
More than three quarters of small to medium businesses (SMEs) have yet to put adequate plans in place to deal with the impact of compulsory employer pension contributions, according to research.
Meanwhile more than two thirds have also failed to adjust their remuneration strategies for executives in light of pension tax relief changes and less than a third are using salary exchange as a way of mitigating National Insurance costs.
The finding, part of a survey looking into the pension arrangements of more than 300 SME businesses, was carried out by BBS Consultants & Actuaries.
Compulsory employer pension contributions are a new requirement applying to all UK businesses regardless of size or turnover which the Government hopes will encourage more workers to save for retirement.
However, SME employers across the board are unprepared for this new legislation with a massive 87 per cent of respondents reporting they had yet to agree their policies on dealing with the new legislation.
“This figure is far worse than we’d feared,” said James Stanfield, director at BBS Consultants & Actuaries.
When first mooted several years ago compulsory employer pension contributions generated a lot of media interest, yet the issue still it appears to be a blind spot in the affairs of many organisations.
“Make no mistake, every SME business will have to offer its employees the chance to join a pension scheme and will also have to pay compulsory employer pension contributions. The longer employers leave it the worse the impact could be for them,” Mr Stanfield said.
“Luckily there is still time for SMEs to get their affairs in order. However, the clock is ticking and many have plenty of catching up to do if the findings of this survey are anything to go by.”
The survey also found that over two thirds of SME businesses have not adjusted their remuneration packages for executives to take into account new pension tax relief rules which came into play in April.
And less than a third (31 per cent) are using salary exchange as a way of mitigating National Insurance Contributions costs for both employer and employee alike.
“Pensions are a topic most organisations, particularly SMEs, tend to shy away from and this survey underlines that fact,” said Mr Stanfield.
“However, these are crucial issues which are not going to go away and will, in fact, gain in importance. My advice to employers is to meet this challenge head-on as soon as possible before it starts to be of serious detriment to the running and management of their businesses.”