Benjamin Franklin observed that there are two certainties in life – death and taxes. Now there is a third certainty that, as an employer, you must automatically enrol your employees into a workplace pensions scheme before April 2017, otherwise The Pensions Regulator will start to levy fines. Auto-Enrolment applies for all employees who are aged between 22 and state pension age, earn more than £10,000 per year and work in the UK. Other categories of employees must also be considered in the process.
Saying this is the easy bit, but actually doing it is proving to be more difficult. In recent research by NEST and DWP*, 63% of employers have found that the process leading up to and beyond the staging date for auto-enrolment (which is the date the new law starts to apply to your business) was more difficult than they had anticipated, whilst 55% found it difficult understanding the legalities of the reforms and 20% of employers took over 16 months to prepare.
The learning from larger UK companies for auto-enrolment: Start Early!
The Auto-Enrolment challenge is a new one for UK employers, and the burden fell initially on the shoulders of larger UK employers, who have had to walk down a road of discovery.
Their experience so far is providing an insight for smaller employers and the advice is to start the process early and communicate regularly with your staff.
How to prepare for your company’s staging date
In preparation for your staging date for auto-enrolment, you should be addressing your payroll system to ensure it is up to scratch, be prepared for low opt-out rates (your employees can opt out after Auto-Enrolment, if they wish, but so far few have) and check that your staff data is both correct and up to date.
You will also need to choose a Workplace Pension scheme to suit your specific requirements and budgeting, by deciding salary definition in line with pay reviews, with one eye on the unavoidable additional costs associated with Auto-Enrolment requirements.
Step 1: Find out your staging date.
Go to: www.thepensionsregulator.gov.uk/employers/staging-date.aspx. Once you know your staging date, you can work backwards, setting key dates for the things you need to complete before the staging date is reached. You’ll find that the majority of UK employers will reach their staging date over the next 3 years, with a peak in 2015 and 2016, for the SMEs we typically deal with. This will include Companies which are run by the Directors and have no staff, per se.
Step 2: Speak to us as soon as possible.
We know the Auto-enrolment process is both complex and time consuming, but we can help you every step of the way. From choosing a suitable workplace pension scheme to ensuring your fully prepared arrival at your staging date … we will be there with you.
And remember, experience over the last 18 months has shown that a surprising number of employees, about 90%, do not opt out, which has implications for the on-going cost of Workplace Pensions for your company. This is largely due to employees being more aware of saving for retirement following the new proposals of flexibility for pension pots announced in the recent Budget, and the onset of a flat rate pension for those retiring after 2016.
So, be aware of what’s happening with auto-enrolment and what you need to do, and get ahead of the game, by contacting us now.