As 2015 progresses, increasing numbers of small and medium sized businesses (SMEs) – those employing up to 30 members of staff – are getting closer to their automatic enrolment staging date, where they will be required to enrol staff into a workplace pension scheme.
Hundreds of thousands of small employers across the UK will have already received letters from the Pensions Regulator (TPR) telling them of their Automatic Enrolment duties as an employer. However many small businesses still don’t know what they need to do.
Research by Enrolsme, an Automatic Enrolment pension provider, questioned 200 small businesses who don’t currently offer a workplace pension, and 200 employees. The survey found that 31% of employers still don’t know what Automatic Enrolment is, and this figure increased to 37% in smaller businesses with 5-10 members of staff.
1.5 million business yet to comply with Automatic Enrolment
The Pensions Regulator does seem to be attempting to do more to raise the profile of Automatic Enrolment and workplace pensions, but given the fact that around 1.5 million businesses are yet to comply, the lack of awareness at this current time a real concern.
If you are one of the 1.5 million business owners still in the dark on Auto-Enrolment, it’s probably time you read, ByteStart’s Guide to Auto Enrolment – 12 key facts small businesses need to know.
Business owners rarely have the capacity to read journals or attend events – or do anything that detracts them from the day job, so here are some quick hints and tips for small businesses on complying with the rules for Automatic Enrolment pensions;
Check who you need to enrol
Once you know your staging date and have provided The Pensions Regulator with the Auto Enrolment ‘Point of Contact’ for your business, you need to check which staff you need to enrol on to the scheme.
Which members of staff you need to enrol is determined by the amount you pay them and their age. There are three different categories that employees will fall into;
1. A right to join a pension scheme
You must provide a pension scheme for these employees, but you aren’t obliged to contribute.
2. A right to opt in
If these employees ask to join a pension scheme, you must put them in your automatic enrolment scheme and make the required contributions.
3. Automatically enrol
You must automatically enrol these employees into your pension scheme and pay regular contributions. You don’t need to ask their permission.
You should do this for all staff 9 months before your staging date. The Pensions Regulator website explains more on enroling staff here.
Understand which earnings are included as pensionable salary
An employer needs to understand the definition of earnings; which earnings will be included in the pensionable salary and – more importantly – which are not.
Enrolsme, who provide a complete online automatic enrolment solution, have produced a 2-minute video that helps explain this.
Select the right pension provider
The next step is to choose a pension provider for your Automatic Enrolment pension scheme. This is where planning becomes key – the sooner you can make these decisions the more likely you will put the best scheme in place for your staff.
Businesses need to start thinking about their Automatic Enrolment journey as soon as possible. If you delay doing this it could mean you have little, or even, no choice when it comes to selecting a pension provider.
Engage your staff
Enrolsme’s research also showed that there is a real opportunity for small businesses to turn the cost of compliance into an opportunity to engage and reward their employees.
Over 90% of employees were in favour of Automatic Enrolment, with 86% of employees worrying about having enough money in retirement. This clearly represents an opportunity for employers to create positive momentum around Automatic Enrolment.
Seek the right support
Clearly, staff will be expecting their employer to do the right thing when it comes to Automatic Enrolment, and many may think it’s a very straightforward task to complete. But, what can’t be ignored is the fact that pensions are complex.
Researching pensions isn’t an easy task – how does the average small business owner know what ‘definition of earnings’ is? Or which of the pension providers are best to use for their scheme? Many are likely to feel out of their depth. It is therefore important to get the right levels of support for setting up the scheme.
What many won’t know is that if the business and payroll data are straightforward, the pension can be set up in a matter of hours. It doesn’t have to be a time-consuming and laborious task.
One word of warning, not all payroll providers are as up-to-speed with Automatic Enrolment as you might expect. In the first instance, you need to check what the pension provider can do for your business.
Know where you stand now
Whether you employ 1 person or 29, it’s vital to have an appreciation of where you stand now. You should look to get your pension provider selected and on board as soon as possible, which will ensure you are ahead of the masses that auto-enrol in 2016.
More help on employment issues
Employing people, and the legislation that it entails, can be one of the biggest headaches for small and growing business. For more help on the subject, try some of ByteStart’s other employment guides;
- Taking on an employee for the first time – 4 things you must get right
- The real cost of hiring your first employee
- Flexible working rights for all employees – what small businesses need to know
- Employment law changes businesses can expect in 2015
- Anxiety and depression – how to manage them in the workplace
- Employers liability insurance – if you employ anybody you are legally required to have cover?
And for tips and ideas on how to get the best out of your staff;
- 5 ways to motivate your staff without spending a fortune
- How setting up a salary sacrifice scheme can reward staff and mean lower tax bills for employers and employees
- How to attract and retain the best employees
- A Guide to mindfulness in the workplace – how it can help staff wellbeing and productivity