Top five tips for small firms tackling auto enrolment

Next year auto enrolment gets serious. In 2016, a staggering 512,000 companies will be affected by auto enrolment regulations and, by law, they will have to offer and contribute to a workplace pension. This compares to just 47,000 in 2015.

For smaller businesses, auto enrolment can feel daunting. The vast majority have no experience of pensions, have no dedicated in-house resource and won’t have the support of an expert adviser. But, tackling it early and having a plan can make a huge difference.

Step one: Plan ahead and prepare

The Pensions Regulator recommends employers begin their planning 18 months in advance of their staging date, but research we recently conducted revealed 75% of micro firms and 46% of small firms haven’t given any thought to auto enrolment.

Leaving auto enrolment to the last minute will inevitably result in 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.

Step two: Include auto enrolment in your budget forecasting

The cost of implementation, planning, payroll modifications, assessment, communications and record keeping will depend largely on the decisions an employer makes regarding suppliers, providers and their current internal structures.

Initially, contribution levels are set quite low. But by 2019, employers must pay a minimum of 3% of qualifying earnings per employee into a pension scheme.

Some employers may also want to seek external advice so will need to budget for this.

Step three: Think carefully about scheme selection

When it comes to choosing a provider for auto enrolment, employers should take the time to consider the options open to them.

The decision they make will have lasting consequences for their workforce and shouldn’t be taken lightly.

For employers completely new to pensions, it may be wise to seek guidance from an expert adviser.

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 are well governed with low charges and good member communications is important.

Step four: Think about your contribution structure

The reality is auto enrolment minimum contributions won’t be enough for most people to be sure of a comfortable retirement. As a result, research suggests nearly one in five small and medium sized companies plan to contribute more than the legislative minimum when they introduce auto enrolment.

More than half of those planning to contribute more believe doing so will help with the recruitment and retention of employees. This approach makes sense as behind holiday entitlement, generous pension contributions are the most highly rated benefit cited by employees.

Step five: Harness the power of payroll

For auto enrolment to run as smoothly as possible, your payroll system needs to have an automated exchange of data with your pension system.

Middleware is the term for a piece of software that links payroll and HR systems to the pension administration system and it pays to talk to your payroll software provider sooner rather than later to find out which pension providers they interface with.

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.

Experience shows that employers supported by a payroll bureau are significantly better prepared for auto enrolment than those that are managing the administration of their schemes alone.

Professionalising your payroll ahead of introducing auto enrolment is wise and the benefits shouldn’t be under estimated.

Auto enrolment is complex and there are lots of things to consider. But, tackle it early and there’s little to fear.

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NOW: Pensions has a good technical infrastructure combined with a pension product suitable for our team. We couldn’t be happier with NOW: Pensions.
Martin Woods,