Workplace pensions and Auto Enrolment is now finding its way into the SME marketplace. Auto Enrolment was first launched in 2012, but the timelines for staging have been designed around the size of payroll and number of staff employed. In 2014, this means that it will broadly impact on employers with 50-250 staff.
With the sheer volume of information and work to go through, we’ve seen some common themes and challenges start to emerge, as we’ve worked with clients towards and through their staging date:
1) Proper Planning and commitment from everyone
There are around 33 different administrative tasks that need to be undertaken prior to staging. The Centre for Economic Business Research estimate that these take around 103 days of work. This brings additional administrative burden to payroll/HR teams in small businesses.
The Pensions Regulator has a “Create Your Plan for Auto-Enrolment” template on its website, but there is much more detail beneath the steps that need to be actioned. It is the employer’s responsibility to enrol staff into a good quality well run pension scheme that offers value for money and protects their workers retirement savings.
From our experience if you can stick to the following rules, then auto enrolment can be delivered on time, without drama!
- Get commitment and involvement from all those individuals within the business that will be affected, i.e. Payroll, Human Resources, Finance Director, Managing Director and Owner (if different)
- Prepare a comprehensive action plan, covering all the tasks that need to be undertaken. Every task needs to be allocated to someone with a deadline for completion. By carrying out regular progress checks any issues can be highlighted and dealt with quickly.
- Plan to keep every task as simple and straightforward as possible. Where ever possible try and fit the rules around your existing processes, do not design processes for the sake of it.
2) The Assessment
The rules expect that during each pay reference period all eligible Job holders should be enrolled into a “Qualifying Workplace pension scheme” (QWPS). From our experience, we would nearly always recommend that this process be carried out by your payroll provider. They are in the best position to carry out this task; by using any sort of middleware solution (provided by some pension providers) you are creating additional tasks and duplicating information. It is important to keep each task as simple as possible.
3) The communication
If you review the “Pensions Regulators website”, there are a number of different letter templates that can be used. You can breakdown your staff into the three different categories and send tailored letters announcing the staging date and possible deferral date to them. However sending specific information relevant to each category creates additional tasks, as you will then be expected to write to these members again if their circumstances change e.g. they change from a non-eligible worker to an eligible worker.
However the regulator also has templates called “General” Letters Type A and B. These letters are good because they give all the necessary information, but also give general information about all three different categories of worker. By using this letter you provide your workers with all necessary information and therefore do not need to write to them again. This is a great example of keeping things simple to reduce additional work in the future.
4) Choosing the correct deferral period
There are three different deferral options,
- the deferral of the actual staging date,
- deferral for exiting members of staff who change category i.e. a birthday
- a deferral period for new staff members
The regulator gives you the opportunity to keep this as simple as possible so unless you wish to be continually calculating pro-rata payments make sure your deferral dates are aligned with either the start of your pay reference period or tax period.
5) Auto enrolment does not stop after staging
Once you are through your staging date, then aside from making the pension payments for your employees, you still need to provide regular updates and information to The Pension Regulator, re-assess your workforce every pay reference period, hold records, ongoing communication with new employees – it doesn’t all just go away.
Payroll and financial software providers will tell you they have a system that deals with all these aspects. But “Buyer Beware” – not all do what they say they will. Business owners need to be very clear – workplace pensions are all EMPLOYER responsibilities and non-compliance issues will fall at the employer’s feet, no-one else’s – so ensure you have a fit for purpose solution going forward.
This can all seem daunting and complicated – but taking early planning action, engaging with your chosen advisers and creating a clear and concise action plan will put you in a great position to succeed.