So you’ve probably heard about auto enrolment and are trying to figure out how to approach it all. Maybe you have received a letter from The Pensions Regulator notifying you about your staging date urging you to start planning, or maybe you’ve heard about it from the media. Regardless, for a small business, auto enrolment can feel daunting.
But tackling it early and having a plan can make a huge difference and help to keep stress levels to a minimum. We have outlined our best tips to get you off to a good start.
1. Plan ahead and prepare
You are going to hear this over and over again. But there’s a pretty good reason for that, because it’s probably the most useful tip you can get. Planning ahead is likely to make the difference between being in control or ending up firefighting.
So no matter what kind of magic your pension provider promises you, if you don’t manage things at your end; keeping your payroll data in order, setting up your payroll to match the data formats of your payroll provider and ensuring you process it correctly, you will run into problems.
Also leaving auto enrolment to the last minute will inevitably result in increased administrative pressure and unnecessary stress. The Pensions Regulator recommends employers begin their planning at least 12 months in advance of their staging date.
2. Think carefully about scheme selection
When it comes to choosing a provider for auto enrolment, take your time to consider the options open to you. The decision you make will have long lasting consequences not only for your workforce but also for your business, and shouldn’t be rushed.
One of the greatest worries with auto enrolment is the administration strain involved so the amount of support your provider gives you is essential.
Here are just a few things to consider:
- Will the provider send out employee communication on your behalf? If they don’t, the responsibility is on you.
- To what extent will your provider support you through auto enrolment with regard to implementation and ongoing administration?
- How much will it cost? The cheaper the cost, the more you’ll probably be expected to do. As in most cases, you get what you pay for.
Good quality schemes should be able to demonstrate their quality through third party assessments such as The Pension Regulator’s master trust assurance framework or Pension Quality Mark. These are designed to highlight schemes that are managed to a high standard.
3. Think about your contribution structure
The reality is auto enrolment minimum contributions won’t be enough for a comfortable retirement for most people. Because of this, nearly one in three small and medium sized companies plan to contribute more than the legislative minimum.
More than half of those planning to contribute more believe doing so will help with the recruitment and retention of employees, as high levels of staff turnover can act as a hidden drain on an employer’s profitability. This approach makes sense as behind holiday entitlement, generous pension contributions are the most highly rated benefit cited by employees.
Contributions are an important subject that you’ll need to get your head around. If you don’t feel confident on this topic, an Introduction to auto enrolment contributions could be very beneficial to you and your workers.
4. Harness the power of payroll
For auto enrolment to run as smoothly as possible, your payroll system needs to have an integrated exchange of data with your pension system.
One of the biggest stumbling blocks for all firms tackling auto enrolment is ensuring all payroll data is complete and up to date. A missing date of birth or national insurance number can cause untold problems further down the line.
Ensuring your payroll is online and uses integrated systems ahead of introducing auto enrolment is wise and the benefits shouldn’t be under estimated. Managing your payroll on paper or spreadsheets leaves great margin for error and is probably not the most ideal way to go about it.
While it may seem like a bit of a hassle at first, making auto enrolment work the best for your business will subsequently save you a lot of time and money.
If you think you’ll struggle to keep on top of your payroll, a solution could be to outsource the work to a payroll bureaux.
5. Include auto enrolment in your budget forecasting
In many ways auto enrolment is like tax – it can’t be avoided. Therefore, to prevent nasty surprises you should also include auto enrolment costs in your budget forecasting.
The cost of implementation, payroll costs, cost of sending out communications, internal resources and other administrative costs will vary and largely depend on the decisions you make regarding suppliers, providers and current internal structures.
In contrast, contribution rates are defined from the outset, and while initially set quite low, by 2019, employers must pay a minimum of 3% of qualifying earnings per employee into a pension scheme.
In addition, some employers may also want to seek external advice and will need to budget for this as well.
There are a number of costs to consider, and not planning for them could be detrimental to your company so why not read Auto enrolment costs & charges just to be safe.
Are you sure you don’t want to download our step by step guide to auto enrolment here.