The Challenge of Automatic Enrolment for Small Businesses
1.8 million SMEs will reach their staging date between April 2016 and April 2018, so it's important to understand the challenges of the legislation.
The Workplace Pension Reforms have brought the biggest shake-up in pensions in decades, and the biggest in payroll since the introduction of RTI. Legislation changes this big bring with them massive challenges for businesses, especially smaller firms who may not have dedicated payroll departments who can manage its implementation.
We’ve previously reported that new research from Geniac found that 52% of the 1.8 million small business staging over the current and next financial year aren’t confident that they will be able to comply. Small businesses in the UK are at risk of receiving financial penalties and even court action, should they fail to comply with the Pension Reforms. Financial penalties for small businesses include a £400 on-the-spot fine, to a rising daily fine of £50 for each day of non-compliance.
Specific areas of automatic enrolment legislation which often cause confusion include the responsibilities of the employer, postponement and reassessment, and pension communications.
The Pensions Regulator recommends that you begin preparation for the reforms at least 12 months in advance, so if you haven’t started already, make today the day you do. Once your staging date arrives, your workforce needs to be assessed for eligibility and have the correct percentage of contributions both taken from their salary, and matched by the business itself. At present, the minimum contributions each pay period stand at 1% from the employer, and 1% from the employee.
We recommend having capable payroll software in place before you reach your staging date, so that you can perform ‘test runs’ of your payroll as if you had staged. This gives you an idea about the time needed to run your new payroll, the costs associated with enrolment and the contributions being made, and also the number of employees eligible. Take a look at the IRIS AE Suite™, the industry's most comprehensive auto enrolment software. The IRIS AE Suite™ has been developed through close relationships with The Pensions Regulator, pension providers and customer feedback, and integrates with your IRIS payroll software helping you comply with workplace pensions legislation.
Postponement & Reassessment
If you would like to postpone your staging date, you can do so for a maximum of three months. This is to give your business extra time to prepare if you need it, or to bring the start of automatic enrolment in line with an important company date. For example, your staging date may be October 2016, but your company financial year starts in January; in this case, it may be easier to align the two dates.
Employees do have the right to opt-out from being automatically enrolled, but they must be re-assessed and re-enrolled every three years – where they can again choose to opt-out, and so on.
The Pension Regulator has listed a number of key stages in a business’s auto enrolment journey which must be communicated to your workforce, and also kept on record for potential auditing purposes.
You must inform your entire workforce about your intentions to enrol them into a workplace pension scheme, this must include the enrolment date, the value of contributions which are to be made, confirmation on any tax relief, and opt-out information in case employees do not wish to be enrolled.
How Can You Best Prepare for Automatic Enrolment?
We believe that the best way a business can prepare for auto enrolment is to get trained on it by the professionals, people who work with and discuss pensions with people every day and are experts in the legislation. IRIS are the UK’s biggest provider of automatic enrolment training, and we have courses running every month up and down the country.
The training introduces you to the legislation surrounding Workplace Pension Reform and what possible impact these changes may have on your business. We will walk you through the various stages of Pension Reform which are essential for you to keep your company compliant and avoid hefty penalties.
Check out our planned dates at www.iris.co.uk/trainingdates, or find out more information about the courses and book using the button below.