Dealing with the strain of small business auto-enrolment
5 min read
09 January 2017
While Hunterlodge founder Rob Hunter is in favour of making sure staff have enough for retirement, small business auto-enrolment has been testing for him.
Small business auto-enrolment has been on the cards for a while and January sees Hunterlodge’s first month after our staging date.
For those of you not familiar with the government’s new pension regulations, the law on workplace pensions has changed dramatically. Following the Pensions Act 2008, it is now the responsibility of every employer to offer a pension scheme for qualifying staff and contribute towards it.
But how will this affect small businesses and what impact will the cost of implementation have on Hunterlodge’s financial forecasting?
In order to prepare for the changes, we knew it was important to work with a knowledgeable provider to help us navigate this new landscape and help inform our employees of their options.
According to research undertaken for a white paper written in March 2015 by Enrolsme, 53 per cent of employees interviewed were unsure whether to participate despite 86 per cent saying they were worried they would not have enough money in retirement. Working with the People’s Pensions, we held a series of workshops with all staff to go through the new regulations and answer any questions or concerns they might have.
Without doubt, it is essential that we are all providing financially for ourselves in our retirement outside of the state pension. Offering this as an employer demonstrates your commitment to your staff and their future and provides a strong recruitment incentive. Hunterlodge is fully committed to offering these benefits for our staff and pride ourselves on ensuring we provide a healthy work/life balance that incorporates a range of initiatives – both financial and non-monetary.
However, there appears to be little recognition that in order to cover these extra costs, you need to go out and win an awful lot of business in order to help pay for it. Although debated heavily in the press, there has been no apparent nod from the government about slapping on an extra small business auto-enrolment tariff to already over-stretched companies. And this burden will only increase over the years as the amount companies are required to contribute increases. Neither the government or employees are acknowledging that this effectively means all staff are receiving a pay rise across the board.
In reality, perhaps the government should be means testing businesses to assess each of these companies’ capability to offer this. For example, if you are a computer distributor you could be working on margins of less than one per cent and the new small business auto-enrolment regulations will have a huge impact on these. As a company, we were prepared financially well in advance for the changes and had built the additional costs into our business model. Our experience has shown that everybody within Hunterlodge has joined the scheme and no one has opted out.
However, it is vitally important to keep a close eye on the rules and regulations of investments and we always advise our staff to gain independent advice from their own financial advisors. For example, if you have your own SIPP with fixed protection and you also join the government pension scheme, you could invalidate your fixed protection.
So whilst we applaud the sentiment from the government that encourages all employees to think about their future, it appears to have little consideration to the overall impact this will have on the smaller business and the longevity of financing the premise.
The smaller business will undoubtedly be less equipped in terms of in-house resource, time and skills to cope with the introduced changes and the government needs to ensure they are putting in place the necessary tools and advice to help these businesses navigate the new regulations.