Lucy Bulley, from NAPIT Wealth, explains the three options SMEs have when it comes to getting auto enrolment in place.
As you may, or may not, already know, the law on workplace pensions has changed. Under the Pensions Act 2008, every employer in the UK must put their employees into a pension scheme and contribute towards it. If you employ at least one person you are an employer with a legal duty to partake in auto enrolment. Newspaper headlines and recent surveys have indicated that two thirds of small to medium size companies (SMEs) have little to no understanding of auto enrolment legislation which could be detrimental to their business as there are fines for up to £10,000 for companies who don’t comply, and in worse cases, possible imprisonment.
According to The Pensions Regulator’s data, of the 63,700 companies that have staged since July 2012, over 95% have complied with the law. The rest have received fixed or escalating penalties. If the current rate of fines being handed out continues, then between now and 2018 it is estimated that 63,000 small and micro UK employers will receive fixed non-compliance fines totalling more than £25m.
As a tradesperson running a small to medium sized business, it is important to know the facts and your options when it comes to auto enrolment to avoid any large fines and to provide a scheme for your employees, so they can save whilst they earn.
Auto enrolment legislation looks like it is here to stay and can be a real burden for many SMEs if you do nothing, so it is best to nip it in the bud sooner rather than later. The pensions regulator recommends that you start the auto enrolment process at least a year before your staging date. Your staging date is the date your automatic enrolment duties come into place and is set in law as of 1st of April 2012. You need your PAYE number to find out the date, or if you don’t pay your employees through a PAYE Scheme, your staging date will be 1st April 2017.
With auto enrolment you are faced with three simple choices. Do nothing, do it yourself or contact an auto enrolment specialist to help and guide you through the process. Auto Enrolment comprises of five Main Phases:
1. Assess Workforce
2. Design the scheme
3. Communicate with staff
4. Implement the scheme
5. Ongoing Record keeping & compliance
It is your decision on how you want to manage the process considering your three options:
1. Doing nothing
If you ignore the legislation because you feel your company is too small or don’t understand how the process works, you are breaking the law. If you haven’t auto enrolled by the time your staging date arrives you will be immediately fined £400 plus on going daily fines of up to £10,000, with the possibility of imprisonment for ‘Wilful Non-Compliance’. It is wise that you choose one of the following options and act fast if you haven’t done so already.
2. Do it yourself
If you decide to tackle the auto enrolment process yourself, you will need to digest the ‘Detailed Auto Enrolment Guidance for Employer’ document which consists of 561 pages. This guidance excludes updates, policy & strategy papers and the multitude of document templates of these guides are difficult to interpret in parts without assistance and it can be easy to make mistakes. There are also 33 Mandatory pension responsibilities, so it can be a rather long-winded process. Doing it yourself does however eliminate costs, so it all dependent on your personal preference.
3. Contact an Auto-enrolment specialist
You can pay auto enrolment specialists to guide you through the process and help you keep on track. There are many wealth and pension management companies out there fully trained on how to help you comply with the new auto enrolment legislation. This comes at a cost, and some specialists can be pricey so make sure you scour the market for the right deal.