03 Jun It’s time for small business owners to tackle workplace pension reform
Are you a small business owner? With auto enrolment in full swing, a recent survey shows the fact that the small employer market is far from ready for auto enrolment. There have been a myriad of auto enrolment facts, figures and surveys released at the end of 2013 which paint the picture that larger businesses have managed to comply with the changes to legislation with relative ease, rolling eligible employees into existing company schemes, or extending policies to meet the new requirements. It’s important to be aware of the legislative timeframe, with the ‘staging dates’ for companies varying according to their size. It’s easy for smaller businesses to think they don’t need to take any action yet as their staging date is still several months off – but the preparation needs to begin now to ensure a smooth transition for employees.
A further 38,000 employers with between 59 and 499 employees (as at 1 April 2012 PAYE size) will be required to automatically enrol their eligible employees during 2014. The table below shows the staging date deadlines for 2014 onwards: To find out a company’s exact staging date, The Pension’s Regulator provides an online tool which calculates the correct date from a company’s PAYE reference.
How do I begin?
Of course knowing the staging date is just the start of the journey. You may be faced with sourcing your first pension provider if you don’t have one already in place. However, finding the right pension provider is only part of the puzzle. The Pensions Regulator advises businesses to start planning at least 12 months in advance of their staging date to ensure a smooth transition. Bear in mind that a capacity crunch within the pensions industry is expected to hit smaller businesses as they head towards their staging dates in 2015/16, by which point over 1 million businesses will have had to source a suitable pension scheme. It could be more difficult and more expensive to get your scheme in place if you leave it until the last minute. Of course, the additional workload combined with the smaller contributions from a small business may not make them a very attractive proposition to pension providers. This is exacerbated by an unintended consequence of the auto enrolment programme – by flooding the market with new business, the government’s scheme has meant that pension providers can be more selective when accepting new clients – for example a FTSE 100 company could be viewed by some as being more attractive than a company with less than 50 employees.
NEST (National Employment Savings Trust – an automatic enrolment scheme for UK employers of any size) is always an option for small businesses – but it may not offer the same level of flexibility as a more bespoke provider. Plus, this is not all about sourcing a pension scheme, but has more to do with payroll processes, and ensuring you have a robust system in place to deal with the more onerous requirements of this legislation. In theory, you can do this without professional help – you could study the Guidance Notes offered by The Pension Regulator on their website as well as researching the pension marketplace yourself, but be prepared to spend a lot of time getting to grips with the various issues and options available. However, we recommend getting professional advice. These are decisions that could have a long term impact on your organisation, and working with a specialist like Wren Sterling means you have someone at your side that understands the regulations, knows the pensions market and can take on much of the administrative burden that setting up a pension scheme involves.
We can provide you with a bespoke project plan so you know what you need to be doing at every stage in the process, and can help you navigate through the detail of the legislation. If you find that you are limited in your choice of provider, and they are unable to provide the level of administrative support you need, then an independent adviser can even help you to create and maintain governance procedures.
Make the most of the opportunity…
While you have to comply with workplace pension reform, it’s also a great opportunity to consider your employee benefits package as a whole. Without a holistic approach, it’s easy to end up with a patchwork of providers, and you may end up paying more than needed for some services.
Auto enrolment may be daunting – but by looking at the rest of your employee benefits package at the same time, you could minimise the disruption such major administrative overhauls usually present. The employee engagement benefits around providing a coherent and well-integrated employee health benefits programme cannot be underestimated, and it is often the soft elements of an overall salary package which can make the difference when trying to retain talented employees.