Are small firms overlooking auto-enrolment benefits?
Auto-enrolment (AE), the legal requirement for employers to provide a workplace pension scheme, can, thus far, have been seen as a success.
The government is on course to reach its target of enrolling 11 million workers by 2018, with more than 5 million workers and their employers already contributing.
Large firms and medium-sized businesses have passed their staging date (the point by which they must have a scheme in place), meaning the focus will now switch to Britain’s smallest companies.
Between January 2016 and March 2018, the number of employers reaching their staging date will average more than 100,000 a quarter, reaching over 200,000 in the first few months of 2017.
Perhaps aware that small firms represent the biggest compliance challenge, due to a lack of either awareness or technical expertise, The Pensions Regulator (TPR) has launched a campaign urging employers not to ignore workplace pensions.
So why should small business owners sit up and take notice of auto-enrolment?
Threat or opportunity for small firms?
Firstly, and most importantly, there are the penalties for non-compliance. These include an automatic £400 fixed penalty notice from TPR, followed by compound daily fines and a two-year prison term.
Putting the issue of penalties to one side, we believe auto-enrolment represents an opportunity for small firms to implement a pension scheme that is genuinely valued by employees.
This view is backed up by research from Barclays Corporate & Employer Solutions, which reveals that many SMEs are finding more benefits to auto-enrolment after their staging date than initially expected.
Barclays found that while only a quarter (26%) of businesses believe before their staging date that auto-enrolment will be a positive, this figure more than doubles to 61% once they have been through the process.
Engagement, attraction, retention
Of those that agree auto-enrolment is positive for small businesses, they see improvements in employee engagement, attraction and retention of staff and productivity.
The key to realising these benefits is communication. This must involve educating staff on the benefits that their new pensions will provide.
Don’t assume that your employees will know how pensions work. Point out that they will receive a contribution from the businesses as well as a top-up from the government via tax relief.
If your pension scheme does succeed in improving your staff retention rates, it will be well worth it. After all, the cost of replacing a staff member can be as high as £30,000.
Embrace auto-enrolment, don’t fear it
Because auto-enrolment is something that will affect all UK businesses sooner or later, here at Innes Reid we are encouraging our clients to embrace rather than fear it.
Done properly, a workplace pension scheme can be the foundation on which to build a broader employee benefits package.
Contact us today on 01244 347583 and speak to one of our employee benefit experts for guidance on choosing the right auto-enrolment solution for your business.
