Smaller Firms Urged Not To Leave Planning To Last Minute
Many small and medium sized enterprises (SMEs) will struggle to meet the cost of administration and employer contributions in relation to auto-enrolment pension rule, says a new report.
According to the CIPD’s ‘Pensions automatic enrolment: the lessons for small and medium-sized employers’ study, a quarter of SMEs anticipated they would need to reduce pay growth, while a fifth expect that they will need to freeze pay to absorb the costs associated with auto-enrolment.
A quarter of the 400 firms that were questioned, predicted that other benefits, such as bonuses and overtime, will need to be cut.
Auto-enrolment will mean that all UK employers must automatically place their entire 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 last year 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.
Charles Cotton, the CIPD’s performance and reward advisor said:
"They [SMEs] are unlikely to have access to the same levels of expertise or support networks as their larger counterparts and, as our survey reveals, many fear that it could be a costly exercise for their business.
"However, with early planning and preparation SMEs can overcome any challenges and realise the opportunity that auto-enrolment offers.
"With some 30,000 employers due to go through the auto-enrolment process between April and July 2014, demand for professional advice and guidance from pension advisers and providers is going to be high.
"We would therefore urge SMEs to act now to guarantee access to the best advice, to negotiate the best rates and secure the most appropriate pension scheme for their business."
The clock is ticking for smaller businesses as the first staging date for SMEs approaches. .
“We have been urging small and medium-sized enterprises not to leave it too late in terms of getting ready for auto-enrolment, indeed our own research revealed that although many SMEs think they are ready, many have not actually considered the key issues. Forty percent, for example, revealed that their payroll system was not compliant, whilst six out of 10 businesses said that they had not checked the pensions provisions contained within their staff contracts and assessed how they affected plans for auto-enrolment.
“The Pensions Regulator has already shown that it is willing to clamp down on larger organisations for non-compliance and it will certainly do the same with smaller companies.”
Nigel Bolton - Partner