Law Change Shows Government’s Concern That Smaller Firms Will Struggle

A leading pensions lawyer has welcomed news today that the Government has extended the period new employees have to auto-enrol in a pension scheme from four to six weeks.

The announcement today by the Department for Work and Pensions aims to make the implementation of the new rules easier for smaller organisations and in addition to giving more time for SMEs to register employees, the deadline for employers to provide information to individuals on their joining rights has also been extended.

Nigel Bolton, Pensions partner at Irwin Mitchell, said: “This is an interesting move and a clear sign that the Government has recognised the huge burden that SMEs face over the coming years as their staging dates approach. Although smaller firms think they are ready for the new rules, our own research has highlighted that the majority have not considered the key issues.

“Providing this extra breathing space will be welcome, but this alone will not solve the issue. What is also clear is the need for a cost-effective automated solution for auto-enrolment. Many SMEs do not have the back office support to cope with this additional piece of red tape and we certainly support a call for a system which makes things easier and enables UK entrepreneurs to get on with growing their businesses.”

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

This latest announcement by the Government follows a report by the Centre for Economics and Business Research (Cebr) which claims that UK businesses are facing £15.4bn in set up costs for auto-enrolment.  According to the ‘Finding Your Way Out Of The Auto Enrolment Maze’ report, each small business faces a set up of £8,900 to get ready for the new legislation. This figure rises to £12,600 for small-medium businesses of 100 employees and £15,600 for companies employing 250 people. It also states that the time spent getting ready for auto enrolment could take each business up to 103 man days, with the recurring administration burden taking over 3 days each month for some firms.