Small business leaders have been subject to the new rules for quite a while now, while others are still waiting for their number to come up (staging dates are staggered according to a business’s PAYE code). The bad news is that a majority of companies found auto-enrolment (AE) more difficult to implement than they had expected – and this includes the larger enterprises who have greater resources and expertise on which to draw.
So how can small businesses hope to negotiate the potential minefield of AE, and so to avoid the potential penalties for non-compliance? The good news is that, with a bit of preparation, AE can be quite straightforward – as long as firms have long enough to prepare.
Ideally, businesses should start to prepare for AE at least six months to a year before staging dates to ensure each have the right business processes and technology in place. Software can do much of the heavy lifting through payroll and pensions administration solutions, but these are two separate business processes creating twice the work for the employer.
Perhaps the best advice for small businesses is to think about pensions and payroll as a single entity. AE should be as much a function of payroll as income tax, national insurance and sick leave. The key, therefore, is to make sure pensions are integrated directly into the payroll process, and not treat it as a supplementary procedure.
Choosing a provider
Another important factor to consider is that businesses won’t necessarily secure a first choice pensions provider. This is partly because of the “capacity crunch” caused by the huge rush of small firms rushing to set up a contribution scheme, but also because a business may not meet pensions providers’ own criteria.
Ensuring the right pension scheme is in place is paramount to offering a quality benefit to employees. Investing time to research options will pay off in the long term. Business owners who already have a pension scheme in place may think they can automatically use this for AE. However, this should be verified with the pension provider.
What’s more, many smaller businesses may fear uncompetitive rates for pension schemes because of the company size. By speaking to a pension provider early on, this risk can be reduced.
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Processes and practices
According to the Centre for Economic Business Research, there are 33 distinct administrative tasks that must be undertaken before reaching the AE staging point, and that this will take on average around 103 days’ work to achieve.
That is certainly a huge commitment for smaller businesses to have to grapple with, especially if there is a lack of a specialist in-house payroll and HR team – but each need not do it alone. Modern payroll software should be automatically compliant with the latest HMRC legislation, including AE, and will help to reduce administration, simplify the processes and remove the heavy lifting for smaller businesses.
Communicate with your employees
It’s worth remembering that the new rules make employers responsible for communicating the workplace pension changes and ensuring their workforce is aware of their rights under the legislation. Small business leaders must provide employees with the correct information in writing, ensuring they are fully aware of their options and manage expectations in advance.
If businesses follow this advice, firms have every chance of making AE run smoothly, leaving employees and regulators happy. For more advice and information, head to www.sage.co.uk and there is a helpful auto-enrolment guide here.
Steven Watmore is payroll and AE specialist at Sage UK.
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