Nest Research Reveals Auto Enrolment Challenges For SMEs

Report Highlights the Need For Smaller Firms To Seek Help

29.01.2014

Nigel Bolton, Partner | +44 (0)113 220 6213

New research by NEST has warned that employers which are due to reach their auto-enrolment staging date this year face three fundamental challenges.

The influential industry report, NEST insights, revealed that smaller firms businesses face what NEST describes as an experience gap, a knowledge gap and a reality gap.

NEST claims that compared to larger businesses which have already reached their staging date, many smaller firms may not be engaging enough with the detail of the reforms.

Auto-enrolment will mean that all UK employers must automatically place certain members of their workforce into a qualifying pension arrangement. All employers must contribute to that pension arrangement and must monitor and keep records of their workforce’s membership of the scheme.

The laws came into effect for the UK’s largest businesses in 2012 and from April 2014, firms with a PAYE scheme size of between 249 and 160 will need to be ready. Firms with fewer staff members will be required to comply with the rules by a particular ‘staging date’ according to their size up until 2018.

It is anticipated that 30,000 companies will stage over a four-month period in mid-2014.

One of the key findings from the research was that 20 per cent of employers which had already passed their staging date had taken over 16 months to get ready. It found that even with this level of preparation, two thirds found meeting their obligations more difficult that they had anticipated.

Commenting on the findings, NEST chief executive Tim Jones said: "The success of automatic enrolment so far, with low opt-out rates and over 2.5 million workers automatically enrolled in a workplace pension, is due in large part to the efforts of first year employers.

"2014 sees a new set of employers meeting their duties and they may find it more difficult than their predecessors. Our research suggests that 9 out of ten employers will expect help to fill any gaps in experience, expectations and knowledge.

"Our research also suggests that intermediaries are gearing up to help, but it’s vital that providers, intermediaries and employers work together to ensure the next wave of employers can meet their duties successfully."

Expert Opinion
This report highlights many of the concerns that we at Irwin Mitchell have voiced previously about auto-enrolment.

“Our own research into auto-enrolment revealed that large numbers of smaller businesses were unaware of what their obligations were. It also suggested that many firms which thought that they were ready in fact were not.

“Businesses that will stage for auto-enrolment this year have acknowledged in this year that they will need help, but with such a large number of companies involved, there is a risk that there will be a shortage of good quality financial and legal advice available in the market.

“It is vital that smaller firms do not ignore their legal obligations and seek advice immediately.”
Nigel Bolton, Partner