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Latest Report Reveals Scale Of Auto-Enrolment Start-Up Costs

Leading Lawyer Says It Highlights Need For Early Action And An Automated AE Solution


By David Shirt

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, highlights the huge task that lies ahead for SMEs – says a leading pensions lawyer.

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.

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.

Nigel Bolton, a pensions partner at leading law firm, Irwin Mitchell, said: “This report shows the scale of the task that lies ahead for businesses that have not yet reached their staging date. Our own report into auto-enrolment earlier this year found that although many SMEs thought that they were ready for AE, in actual fact many of the key issues had not yet been considered.

“With businesses needing to spend so much time gearing up for the new changes as well as the added ongoing administrative burden, it is vital that businesses take action and take the appropriate advice.”

Nigel added; “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.”