HR · 26 February 2016

Auto-enrolment: Employers worried of “crossing the line” and providing advice

Small business groups gave auto-enrolment evidence to a select committee on 24 February
Small business groups gave auto-enrolment evidence to a select committee on 24 February

Small businesses are fearful of appearing to give financial advice to workers as part of obligations under auto-enrolment, a committee of MPs has heard.

Appearing before a work and pensions select committee on 24 February, small business groups emphasised concerns about the liabilities member companies could face if found to be accidentally giving advice via the auto-enrolment process.

Chief executive of the Association of Convenience Stores James Lowman told the committee: “People are terrified about being seen to provide advice, and if they do provide advice, the rules around that and what they are able to do.”

The time and effort required to conduct sufficient research when choosing an auto-enrolment provider could put many of the UK’s smaller firms off, said Lowman, adding that employees are increasingly being pointed towards the National Employment Savings Trust (Nest) – the universal workplace pension scheme set up by the government – as a way for business owners to avoid liability, regardless of whether or not it represented the best option for workers.

Lowman went on to say: “Nest is the government’s scheme and the path of least resistance for employers. It helps say to staff ‘we are not making money from this, there is no kick-back and no advantage, we are just making available the simplest government scheme and that is quite attractive for small businesses.’

“Small businesses recognise that to do extensive research on all sorts of available schemes and come up with one is a large task and is one that comes with all sorts of responsibilities. Unless a firm has a lot of financial expertise, why would it do that?”

FSB policy director Mike Cherry also expressed concerns that employers risk accidentally crossing a line into advising workers by settling on Nest as a quick-fix auto-enrolment solution. “We are all worried about whether that would be the right choice, there is no guarantees and that is a concern for most people,” Cherry told the committee, requesting that the planned 2017 review of auto-enrolment be postponed.

The cross-party committee is taking the temperature of small business, looking into auto-enrolment and finding out how the process is going so far.

The latest figures have indicated that small and micro businesses have so-far largely been able to meet the challenges faced by auto-enrolment. The first group of businesses to reach a staging date set by the government in June 2015 achieved a 90 per cent compliance rate, according to last month’s Pensions Regulator Quarterly Compliance and Enforcement bulletin.

Are you a sole trader confused about your duties under auto-enrolment? Read on.

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ABOUT THE EXPERT

Fred Heritage was previously deputy editor at Business Advice. He has a BA in politics and international relations from the University of Kent and an MA in international conflict from Kings College London.

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