Have you heard the one about the employer, the employee and the Pensions’ Regulator?
As the secret of good comedy is timing, so the same applies to the new auto enrolment regulations. But, get your timing wrong with AE and it’s anything but a laughing matter.By Pierce.
By now, you’ll have seen the TV ad campaign “We’re all in,” showing employees and a host of celebrity employers, like TV ‘Dragon’, Theo Paphitis and ‘Apprentice’ guru, Lord Alan Sugar, telling us they’re all in too (I suppose it makes a change from “I’m out” and “you’re fired!”) but have you realised what it means for your business and are you prepared for the likely cost implications and the inevitable red tape?With larger employers well into Auto Enrolment, the focus has now turned to SME`s, so this is an ideal opportunity to explain what Auto Enrolment means to you and your business...
It’s really no joke…Unless you are the only person in your business, you are required to automatically enrol your staff into a workplace pension. There are very few exceptions.
Every employer must comply by law and failure to do so could result in fixed penalties or escalating fines like those shown below.No of employees Daily fine 1-4 £50 5-49 £500 50-249 £2,500 250-499 £5,000 500 + £10,000
Timing is everything!Now, this is where timing is everything, because each employer has a staging date set by the Pensions’ Regulator. The date determines when you are legally required to start making pension contributions on behalf of your staff. Your staging date can be deferred by using postponement, for a maximum of three months, however, within this time, your employees may wish to join the pension scheme; therefore you must have a scheme in place by your staging date. This date is always the 1st of the month and it can be brought forward if you choose to do so.
Don’t get caught in the trap of thinking that you don’t need to worry, just because another business, similar to yours, hasn’t yet gone into Auto Enrolment. Staging dates are based on historic information held by HMRC, when your business may have looked a lot different!You can find out your staging date on the Pensions Regulator website or better still ask us to help?
What about the delivery?There are a number of key requirements for Auto Enrolment which can be found on our dedicated Auto Enrolment website - www.auto-enrolment.pierce.co.uk
Start early - time is running out…The time frame recommended to implement Auto Enrolment is twelve months, although this may vary depending on individual circumstances.
The BottleneckPensions Minister, Steve Webb, has already warned small businesses to start preparing early to avoid the impending capacity crunch. We have heard of a number of pension providers who are already struggling to cope with the volume of schemes and employees joining from larger employers.
The number of employers staging per month is set to increase dramatically. In early 2014, for example, approximately 3000 employers staged each month but by February 2016 this figure is set to increase to 30,000 and by December 2017 a staggering 134,000! This means planning early is essential.Involve all parties
From our experience, the key to successfully implementing Auto Enrolment is to plan and involve all parties (including an independent financial adviser and your staff) at the start of the project. If you don’t have a financial adviser, we can recommend one to you that is experienced in Auto Enrolment.Link to your payroll
Having the involvement of payroll can ensure all critical questions that have an impact on the pension scheme setup through payroll, are answered and also how and when the pension is calculated and deducted from employees. The process should be well thought out, considering all options available and ensuring the most streamlined approach is taken. Technology will play a key part.
Understanding the HR and financial implications is significant to any business. Things to consider are:
• Type of workforce – Are your employees paid a standard salary or is there overtime, bonuses to consider?
• The use of Salary sacrifice – This reduces the tax and NI liability for an employee/employer. However, using this for Auto Enrolment does have contractual issues.
• Salary reviews – Are salaries due to be reviewed? If a 3% increase is due, you could give a 2% increase and utilise the other 1% towards the pension.
• The management of staff expectations is crucial, as they will also be making contributions, which will reduce their net pay. You should be prepared for the inevitable question – “Will I get a pay rise to make up for my lost earnings?”
• Staff retention – is this an opportunity to tie in the most important part of your team?