Auto Enrolment legislation means a fundamental change to workplace pensions for small business owners. As part of the government’s campaign to ensure UK employees are adequately prepared for retirement, the scheme will combat the demographic and economic challenges of an ageing society.
The goal? Encourage a retirement savings culture and empower workers to better save for their futures. Being staged over six years, Auto Enrolment means businesses of all sizes will have a legal obligation to start paying into employees’ pension funds. Employers must automatically enrol eligible jobholders into a workplace pension scheme that meets the conditions set out in the legislation.
Thousands of the UK’s largest employers have already done this. For over 14,000 of the UK’s smallest businesses, the time to act has arrived. As of the 1st June 2015, small and micro employers with fewer than 30 employees started being phased into the scheme and will begin to grapple with the complexities of employer pension schemes for the first time. To help you prepare and tackle Auto Enrolment like a champion, our Champions Cheat Sheet provides a must-follow guide on how employers can get organised. A winning formula for any business owner to triumph over Auto Enrolment. Here’s what you need to know:
Don’t delay: find out your staging date in advance
It’s tempting to put it off, but Auto Enrolment can be complex. For small businesses, HMRC warns it may take as long as 12 months to get a compliant scheme up and running. The trick? Get prepared early. Find out the date your Auto Enrolment duties come into effect as soon as possible by visiting the Pensions Regulator website and work backwards from there.
If you don’t pay your workforce through a PAYE scheme, your staging date will be 1 April 2017. Factor in the time required to plan finances, and do the admin, as well as integrating payroll into a pension scheme. The tasks themselves may not be huge, but they take time – particularly when dealing with pension providers or third parties. Every part of the Auto Enrolment puzzle needs to come together at the right time if it’s to run smoothly.
Find a winning Pension Scheme
As the deadlines for Auto Enrolment roll closer, demand for pension providers is going to rise exponentially. Ensuring the right pension scheme is in place is paramount to offering a quality benefit to employees, while reducing administration time and costs. Investing time to research options will pay off in the long term. Seek guidance from an independent financial adviser, an accountant or a payroll provider who will be able to advice you on ensuring your business is fully compliant with the new rules.
Firms should also seek a pension provider that enables them to manage the process online and which integrates with their payroll system to make the whole process smoother.
Avoid an administrative headache with up-to-date payroll software
Good news, as help is at hand for small firms navigating the complexity of Auto Enrolment. Your Payroll team will a key champion for Auto Enrolment but with up-to-date payroll software, you can alleviate the administrative burden and reduce the time and cost issues associated with it. Using software which is automatically compliant with the latest HMRC legislation can make the integration between pensions and payroll seamless, and easier for you to be compliant than ever before!
Plan future finances
Auto Enrolment can be expensive for a small business as employers must pay a regular contribution into their staff pension scheme. The starting threshold currently sits at 1 per cent of an employee’s qualifying earnings, which will rise to 3 per cent by 2018 as contributions ramp-up year-on-year. Financial forecasts should be undertaken as soon as possible to establish the impact pension contributions may have on future cash-flow.
Communication is key
It’s now a legal requirement for employers to inform staff about Auto Enrolment – how it will affect them, what their contribution is as an employer, and their rights as an employee to opt-out of the scheme. This should be communicated in writing via letter or email, and could also come from a pension or payroll provider. However, employers must be careful to not influence staff in any particular direction, such as offering incentives to opt-out of Auto Enrolment. Breaching these rules may incur financial penalties from The Pension Regulator.