Updated 03 September 2020
Big business has already faced auto-enrolment, now it’s the turn of the smaller firm. Petra Griffiths shares the problems she’s come across and explains how to prevent SMEs taking the same tumbles.
Workplace pensions and auto-enrolment is now finding its way into the SME marketplace. First launched in 2012, the timelines for staging have been designed around the size of payroll and number of staff employed and in 2014, this means that it will broadly impact on employers with 50-250 staff.
Employers will receive notification for The Pension Regulator 18, 12 or six months prior to their staging date. Your accountant or independent financial adviser may have already advised you of this. There is a huge amount of information on auto-enrolment available from The Pension Regulator, NEST, or perhaps you’ve also had information sent to you from your existing pension provider.
“The ongoing assessment of your workforce has to be undertaken after each pay reference period – non-alignment will cause you a headache if not addressed at the outset and prior to staging”
With the sheer volume of information and work to go through, we’ve seen some common themes and challenges starting to emerge as we’ve been working with clients towards and through their staging date:
1. Not starting early
There are around 33 different administrative tasks that need to be undertaken prior to staging and is estimated that these take around 103 days of work, according to the Centre for Economic Business Research. This brings additional administrative burden to finance teams in SME businesses. The Pension Regulator has a Create your Plan for Auto Enrolment template on its website, but there is much more detail beneath the steps that need to be covered off. It is the employer’s responsibility to enrol staff into a good quality pension scheme that is well run, offers value for money and protects their workers retirement savings.
A common approach we have adopted with clients we are advising straight from the outset is setting milestones and outlining responsibilities between ourselves and clients towards staging, with regular ongoing communication helping ensure that ‘all boxes are ticked’ and that any issues or complications are identified early to allow resolution, before it becomes a real last minute problem.
Why? According to NEST Insight 2014, 63 per cent of companies auto-enrolment more difficult than they’d anticipated.
2. Thinking that normal rules apply
What may be normal for your business is not necessarily normal for auto-enrolment. Contract hours go across several business sectors – we’ve seen it in clients such as nursing homes, restaurant chains, and electrical manufacturers. It is totally normal that workers work different hours each week, or month – but if your staging date is not aligned at the outset to your payroll payment dates – you may need to use what is called ‘postponement’, if only for a few days to get these together.
Why? It comes down to that ongoing assessment of your workforce has to be undertaken after each pay reference period – for these sort of workers, non-alignment will cause you a headache if not addressed at the outset and prior to staging
3. Forgetting regular updates
Once you are through your staging date, then aside from making the pension payments for your employees, you still need to provide regular updates and information to The Pension Regulator, re-assess your workforce every pay reference period, hold records, ongoing communication with employees – it doesn’t all just go away.
Payroll and financial software providers will tell you they have a system that deals with these aspects. But ‘Buyer Beware’ – not all do what they say they will. Business owners need to be very clear – workplace pensions are all EMPLOYER responsibilities and non-compliance issues will fall at employer’s feet, no-one else’s – so ensure you have a fit for purpose solution going forward.
This can all seem daunting and complicated – but taking early planning action, engaging with your existing professional advisers, or seeking advice if required – with clear, ongoing communication between what becomes your workplace pensions ‘team’ makes the understanding, implementation and compliance around workplace pensions all that more easier.
Find an independent financial adviser to help your business tackle the challenges of auto-enrolment.
About the author
Petra Griffiths is a Director at PSG Financial Solutions, based in Sussex. Petra has worked in the financial services industry for 25 years, including two top high street banks and formed the business in 2012. Working with SME businesses and directors forms a large part of Petra’s time, including collaborating with accountants and solicitors to achieve the best outcomes for their mutual clients.
Please note: The opinions, beliefs and viewpoints expressed by our contributing authors do not necessarily reflect the opinions, beliefs and viewpoints of unbiased.co.uk.