Act Early To Assess The Cost Of Auto Enrolment

Legal Expert Calls On Businesses To Consider Their Plan Of Action

15.10.2012

Employers have been urged by pensions lawyers at Irwin Mitchell to assess their options early in relation to meeting the costs of the new auto-enrolment scheme, after official figures suggested a number of businesses may look to implement pay freezes.

The Department for Work and Pensions has estimated that companies could look to cap wage increases for staff in an effort to offset the costs that the implementation of the new scheme will create.

While the initiative was introduced at the start of this month, its rollout has been staggered so that businesses will be adopting it over the next few years. Some small and medium-sized businesses may not have to implement the plans until 2018.

Nigel Bolton, a Partner and expert in pensions issues at Irwin Mitchell, said that despite the delay that some employers are facing, it is hugely important for companies to being considering the impact of the scheme as soon as possible.

He outlined: “The potential for pay freezes to be introduced has widely been mooted. The Federation of Small Businesses last year predicted that 37 per cent of its members would take this route of freezing salaries in order to pay for pensions. There are, however, some alternatives.

“For instance, many employers are looking at reforming the whole employee benefit package to offset additional cost. This would entail removing costly, unappreciated benefits from one area to make savings and ensure the auto-enrolment costs are as neutral as possible.

“Employers could see this as an opportunity to improve both employee morale and benefits, as well as boost the company finances by looking at introducing salary sacrifice. This would generate National Insurance savings for both parties and also has the advantage that auto-enrolment contributions are paid on the post-sacrificed amount.

“The key for maximising the position from an employer perspective is to begin the planning process early and consider all of the alternatives which are available.

“Many employers that simply leave it too late will find that auto-enrolment is just about extra costs.”