The roll out for auto-enrolment (AE) started in October 2012 and will see ten million people saving towards their retirement. This means more than 1.3m UK employers must enrol employees onto a scheme and are legally obliged to make a contribution towards the pensions.
However, according to the latest AE compliant report, the number of employers in the UK who have breached the new workplace pension rules has significantly increased. In addition, from October to December last year, the Pensions Regulator issued 166 fines of £400 and 1,139 compliance notices.
The basics of AE for SMEs and the need to get the UK workforce paying into a pension scheme are no different to the original requirements that were faced by the largest companies due to comply to AE duties in 2012.
Those at the smaller end of the market won’t necessarily have a department dedicated to running payroll for a large team or have the resource to investigate and implement the best practice. As a result, it could fall to the person running the finances or even the manager or business owner to fully understand AE and make the business critical decisions required in advance of the allocated date.
In order to stay ahead of the AE boom and avoid potential fines and penalties, SMEs should consider the following:
Comply or get fined:
The very real possibility of being fined for non-compliance is an obvious reason to be compliant. However, as more and more companies comply with new AE requirements in large volumes over the next year or so, they must remember they will be just one of thousands looking for the right pension and guidance simultaneously. If left until the last minute, response times will inevitably slow as potential client numbers grow.
Take the time to learn:
Time must be taken to learn what AE really means to a business, but this in itself will take time due to issues such as the terminology, rules, communications and declaration of compliance. It’s easy to not give AE the time or attention it deserves when other day-to-day demands of the business need to be dealt with, but failure to focus on it now will cause headaches further down the line.
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Don’t make assumptions:
A business which has a pension scheme in place for some of its workforce may think it can automatically use this for AE, but it needs to be checked with that pension provider, not assumed. There have also been assumptions made in relation to the transfer of data between payroll software and pension provider. It may seem a simple task but in reality data file formats differ and need to be checked with individual pension providers so as to save administration headaches.
Ease the stress:
Small to mid-sized enterprises can help alleviate the AE struggle by ensuring they are familiar with the rules and regulations, and deciding what it means for their business as a whole. For example, will the company have the time and resource to continue running payroll in-house? They may decide to outsource this to a payroll bureau and relieve themselves of the burden.
Preparation is everything:
Like many things in life, businesses can’t prepare enough and AE is no exception. The Pensions Regulator has been sending out letters 12 months in advance of when a company’s new duties come into force to encourage professionals to start thinking about AE in good time. SMEs should begin gathering information to complete their declaration of compliance well in advance of their deadline. Businesses also need to be aware of the importance of planning and testing, because there will always be something that wasn’t anticipated. Companies that fail to prepare often leave themselves vulnerable to making mistakes and misjudging the amount of time it will take to meet deadlines.
Auto enrolment is an employer’s duty and non compliance is a risk SMEs simply can’t afford. Those businesses that start early, get familiar with AE rules and who are fully prepared will be the ones who handle the changes that AE brings with the most success.
Dawn Jackson is payroll product manager at software firm Access Group.
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