Auto-enrolment is currently being phased in for all UK Employers. Unlike many previous Government legislative changes the new rules apply to all UK employers regardless of their size, as such all businesses will be affected at some point leading up to April 2017. For some this will be sooner rather than later!
CAN YOU IGNORE IT?
As with any new legislation, you can choose to ignore it – but it is not advisable. Non-compliance brings with it significant potential fines. For this year these fines can range from £500 – £2,500 per day for non-compliance.
IF I HAVE AN EXISTING SCHEME, DO I NEED TO DO ANYTHING?
Yes, unfortunately there is still work that will need to be done by you to comply with the new rules. You also need to review employees who are not members of any scheme you may have in place. So, even if your scheme is auto-enrolment compliant you will need to take action. Depending on your own situation there could still be a considerable amount of things you need to do or put in place.
WHAT ARE THE NEXT STEPS?
1. Find out the date you need to comply (your staging date)
|60||1st October 2014|
|58||1st January 2015|
|54 – 57||1st March 2015|
|50 – 53||1st April 2015|
|40 – 49||1st August 2015|
|30 – 39||1st October 2015|
2. Start preparing
Complying with auto-enrolment is complex. You need to start the process early so that you can put in place a solution that is right for your business and for your employees. Being able to choose the best solution for your business is likely to be very challenging if you leave it too late, worse still you may not be able to meet the deadlines which could result in your business being fined.
3. What are the cost implications?
These can be split into two areas; the direct costs of actually paying contributions on behalf of your employees and the time cost of preparing and meeting your new responsibilities. The employee contributions you are required to pay increase as we get closer to October 2018 by which time they are around 3% pay. Be warned, to undertake the work internally there are over 250 pages of guidance that the Pensions Regulator has issued that you would need to work through and more importantly understand!
4. Categorise your workforce
You will need to categorise your workforce into three bands, eligible jobholders, non-eligible jobholders or entitled workers. Each category has different entitlements under auto-enrolment rules. This is a critical part of the process and one that continues every time you run your payroll after you have past your staging date.
It’s not just the company that is affected by the changes – this will have an impact on every member of your staff. How you communicate with them will determine whether or not this is a smooth process or an HR disaster. There are many communications you have to provide as a statutory requirement so getting this part of the process right will go a long way to determining the number of phone calls and queries you will get from your workforce.
The biggest challenge for businesses will be the ongoing monitoring, reporting, record keeping and compliance associated with auto-enrolment and ensuring that all members of the workforce are being treated correctly and communicated with appropriately every time you run your payroll.
The only way to successfully achieve this is to ensure you have the appropriate systems in place that take care of all of this for you in an automated way. This is a far bigger consideration than setting up the pension scheme itself.
There is a danger that trying to understand and implement all of this could take up a disproportionate amount of time for a business owner and in many cases it could end up costing a lot more than it needs to.
Nominating a dedicated auto-enrolment “champion” within the business is a good start. This could be the HR Manager or one of the Directors of the business. They can work with an auto-enrolment specialist to come up with a clear implementation plan, roll out the communications to the team, set-up the scheme and sort out the ongoing systems.
What happens next
It is important to engage with a professional adviser that can provide a specifically designed end-to-end solution which includes full administration and governance. Your auto-enrolment partner should offer you advice and support every step of the way that will allow you to stay focused on building your business – not running your pension scheme. If you’d like to consider AGL Corporate Services we are firmly here to support companies and their advisers and would love to help.
For more information on auto-enrolment please visit our dedicated sitehttp://ae.aglcorpserv.com/ or call 0141 314 3765 or 0131 240 3830.