With very limited exceptions, every organisation in the UK – no matter how small – has to get to grips with the biggest administrative burden that the government has landed on businesses since the implementation of VAT. If your organisation has its own HR department you’ve probably got it sorted, but for small companies it’s only now that the dreaded “Staging Dates” are starting to hit.
Your organisation has two choices: do it yourself or outsource.
You may already have received your “Act Now” introductory letter from the Pensions Regulator and put it to the bottom of the pile. But if that date is within six months (and most New and Growing Companies fall into the 2016/2017 band) then you’d better dig it out and start acting now because it really does take time and effort to get it started and you will face real fines for non-compliance.
Your organisation has two choices: do it yourself (take a look at thepensionsregulator.gov.uk) or outsource. But either way, you need to get a good overall understanding of how it all works, choose the pension scheme, decide how much you are going to contribute (there are legal minimums but a number of confusing discretionary options) and be ultimately and legally responsible for the scheme.
Good payroll software takes away some of the pain, but the additional pensions’ elements are considerably more complex. Then you need to explain everything to your employees through mandatory communications, make sure the legally required deadlines are met on an ongoing basis (forever) and also administer the scheme with your scheme provider.
Employees will also have questions: How does it work? Why this scheme? Is it worth it? Can I opt out? (Interestingly, only 10 per cent do). Moreover, the employee who processes your payroll or your payroll provider may not be willing or able to do all of this. They will almost certainly not be best placed to advise you on every aspect of the process.
Automatic enrolment is here to stay. Sticking our heads in the sand is not an option.
Many employers (and many experts) have serious doubts about the wisdom of them being legally responsible for what is a lifelong area of personal finance, not least because the minimum legal contributions – effectively 3.3–6.9 per cent of salaries, which most employers/employees make by default – will anyway provide inadequate pension pots.
But automatic enrolment is here to stay. Sticking our heads in the sand is not an option. So let’s be positive: the government’s refund of income tax on employees’ contributions is well worth it. And what if employers and employees work together over time so that remuneration packages allow for 10–15 per cent contributions (the levels required to reach meaningful pension funds)? Why not be an organisation that turns a significant burden into a massive opportunity for your employees and in the process earns their lifelong gratitude?
Robert Scrafton is a director of LSC London, a consultancy specialising in supporting small businesses, based at The Light Bulb in Wandsworth.