For small companies, auto enrolment is now looming large on the horizon. Starting in June, firms with fewer than 30 staff will begin reaching their staging date. Many of these companies will have little or no experience of pensions and will be approaching auto enrolment with some trepidation.
To help these firms navigate the complexities of auto enrolment we’ve prepared five top tips to get “AE ready”.
1. A little planning goes a long way
For small businesses faced with the prospect of tackling auto enrolment, planning ahead shouldn’t be underestimated. The Pensions Regulator recommends firms begin their planning 18 months in advance of their staging date but it seems their pleas are largely falling on deaf ears.
Research we conducted with 450 small and medium sized companies earlier this year revealed that 44% haven’t given any thought to how they’ll go about finding a provider for auto enrolment while over a fifth intend to rely on their existing provider.
This relaxed attitude was confirmed by financial advisers with nearly three quarters of the 244 we questioned in August claiming that employers are coming to them for advice either very close to, or after their auto enrolment staging date.
Leaving auto enrolment to the last minute will inevitably result in more limited provider choice, increased administrative pressure and unnecessary stress. The simple truth is the longer businesses allow themselves to implement the changes, the easier the process will be.
2. Don’t make any assumptions
Companies planning to rely on their existing provider for auto enrolment should speak to them early on to ensure that the scheme qualifies for auto enrolment and to confirm that they are willing to extend it to all employees on the same terms.
A staggering 93% of advisers say pension providers are cherry picking auto enrolment business and the upshot of this is that day after day we hear from firms who’ve been let down at the last minute.
3. Seek help
For small firms introducing a workplace pension for the first time, it probably pays to seek some help from an adviser who can help identify a value for money scheme that is suited to the workforce.
While selecting an appropriate scheme is imperative, payroll providers also have a very important role to play. Companies with outsourced payroll arrangements should contact their payroll provider as soon as possible to find out what auto enrolment support they offer and which pension providers they work with. By selecting a pension provider that is already integrated with their payroll provider, firms can avoid unnecessary hassle and expense. So making enquiries early on is time well spent.
4. Cleanse your data
One of the biggest stumbling blocks with the auto enrolment process is inaccurate or incomplete payroll data. Taking time to ensure that payroll data is complete and entirely up to date will help avoid problems during the implementation process and beyond. Where possible, companies should try and obtain e-mail addresses for all staff as issuing communications about auto enrolment via email is often cheaper and more efficient than post.
5. Give thought to contributing more than the minimum
Nearly one in five small and medium sized companies we surveyed say they plan to contribute more than the legislative minimum when they introduce auto enrolment.
More than half of those planning to pay more believe in doing so will help with the recruitment and retention of employees. This approach makes sense as high levels of staff turnover can act as a hidden drain on an employer’s profitability.
In fact, research we conducted with 2,000 employees found that behind holiday entitlement, the quality of the pension is the benefit employees value the most with high employer contributions top of their wish list. So, while auto enrolment is a legal obligation, employers can view it as an opportunity to offer a benefit that will help attract and retain employees.
With the introduction of auto enrolment, employers are being asked to make important decisions that will have a long term impact on their employees’ future finances. It’s not a responsibility to be taken lightly so make sure you give it the time it deserves.