Auto-enrolment: Why pay more?

First published 08 July 2013 • Updated 13 March 2018

Smaller businesses should think about paying more than the minimum contributions into auto-enrolment schemes. Why? Allan Maxwell explains.

Why should you be one of the small to medium sized employers (SMEs) who pay more than the auto-enrolment minimum contributions for at least some of their workers?

“Auto-enrolment can be seen by employers as a further administrative burden and pseudo taxation.  But it shouldn’t be seen this way”

The Department for Work and Pensions has recently published research that says at least 30 per cent of SMEs will pay in more than the auto-enrolment minimum for some of their workers.  Employers with between 50 and 250 workers are the most likely to pay that higher level of contribution.

But why would employers want to pay more?

• By paying a higher level of contributions employers may simplify the administrative requirements of auto-enrolment.  The reduction in administrative time offsets the additional cost.
• Paying a higher level of contributions may also be attractive to prospective employees who see provision of a pension as an important feature of their remuneration package.
• The employer will be seen as one that values the contribution made by its employees.
• Paying a higher pension contribution rather than additional salary will reduce the employer’s national insurance contributions.

Auto-enrolment can be seen by employers as a further administrative burden and pseudo taxation.  But they shouldn’t see it this way. It’s actually a great opportunity for their business.  Those SMEs who embrace the introduction of workplace pensions and auto-enrolment have the chance to generate a positive message for their employees and be a leading example.  After all, a well-communicated introduction of a higher-quality pension scheme is likely to create a reciprocal response from employees.