Micro firms need not be fearful of imminent auto-enrolment commitments so long as proper steps have been taken to prepare a business for the changes, a workplace pensions expert has said.
CEO at Now:Pensions, Morten Nilsson, has published small business advice on how to meet the various challenges posed by the new system, which will this year require over 500, 000 small firms to automatically enroll eligible employees into a workplace pension scheme and make contributions.
for anyone that runs a small business, auto-enrolment can feel daunting, Nilsson said. ‘smaller employers tend to have little or no experience of pensions, they don’t have the dedicated in-house resource that larger companies enjoy, nor do they necessarily have the support of an expert advisor.
the key is to tackle it early and plan, she added.
Nilsson outlined five top tips to make life easier for employers approaching auto-enrolment:
Plan ahead and prepare
The Pensions Regulator recommends that employers should take eighteen months to plan for auto-enrolment before a set staging date.
leaving auto-enrolment to the last minute will inevitably result in increased administrative pressure and unnecessary stress, said Nilsson.
the simple truth is the longer businesses allow to implement changes, the easier the process will be.
Include auto-enrolment in budget forecasting
Contribution levels are initially set quite low, but by 2019 employers will be required to pay three per cent of qualifying earnings per employee into a pension scheme.
The decisions employers make about suppliers and providers, along with current internal structures will have an impact on the costs to implement auto-enrolment, including the payroll modifications, assessments and record keeping necessary.
Think carefully about scheme selection
Nilsson suggests that employers should take time to consider a provider, as the decision will have lasting consequences for staff.
Schemes of good quality will have received strong third-party assessments. The Pension Regulator’s master trust assurance framework or Pension Quality Mark exist highlight schemes that are well governed with low charges and good member communications.
Think about your contribution structure
According to Nilsson, generous pension contributions are the most highly rated benefit cited by employees.
Auto-enrolment minimum contributions won’t be enough for most people to be sure of a comfortable retirement, but research compiled by Now: Pensions suggested that nearly one in three small firms plan to contribute more than the legislative minimum when enrolling employees onto a scheme.
Over half of firms intending to pay more than the minimum say they believe it will help with the recruitment and retention of employees.
Harness the power of payroll
Payroll systems need to have an automated exchange of data with pension systems to run smoothly, Nilsson said. Employers regularly face the challenge of ensuring all payroll data is complete and up to date, with a missing date of birth or national insurance number causing potential problems.
According to Nilsson, small firms supported by a professional payroll bureau are far better prepared for auto-enrolment than those managing the administration of schemes alone.