Employment law

Small business owners struggling to deal with auto-enrolment costs

Hannah Wilkinson | 21 June 2016 | 8 years ago

auto-enrolment costs
Employers currently have to contribute the equivalent of one per cent of employees’ salaries to their pension pots
Small firm owners are considering pay freezes and increasing their use of contractors in response to the financial burden posed by auto-enrolment, according to new research carried out by the International Association of Book-keepers (IAB).

Of the member bookkeepers and accountants surveyed by the association, one-in-five indicated that their clients are considering cutting employees hours in response to the legislation.

The accountants and bookkeepers surveyed were also of the opinion that their small firm clients are lacking in understanding of auto-enrolment regulations.

Employers currently have to contribute the equivalent of one per cent of staff’s qualifying earnings to their pension pot though this is set to rise to three per cent in 2019.

Under ten per cent of clients are passing the cost of this on to their own customers, the new research also revealed.

whilst the government, through its agencies, is making some efforts to inform businesses about these new obligations, it would appear that many micro and small businesses feel that it isnt doing enough to support them in either a financial or educational capacity, particularly as many of them are still fighting to find their footing after the recent recession, said IAB chief executive Malcolm Trotter.

Since the first companies were obliged to auto-enrol employees in pensions in 2012, almost five per cent of owners have failed to do so. Micro business leaders who ignore government warning letters about auto-enrolment can be fined from 50 to 500 per day, depending on the size of their firm.

As small firm owners begin to be included in this legal obligation, additional research published by payroll company Paycircle in May 2016 has suggested that as many as 63, 000 small firm owners could face fines totalling 25m for missing their auto-enrolment staging date between now and 2018.

now is the time for small firms to be proactive about auto-enrolment, or face fines that can rapidly escalate, said Paycircle co-founder Catherine Pinkney.

Is auto-enrolment still an enigma to you? Have a read of these top tips.

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