Auto enrolment (AE) is the biggest shake-up to pensions legislation ever, meaning it is likely to be on the menu for discussion this Christmas.
Whilst many large and medium-sized corporations have AE in place, a significant amount of smaller employers – 1.8 million – will need to automatically enrol their workers by 2018. Although this might seem like a distant milestone, preparing for auto enrolment should be at the top of every small business owners New Years’ resolution list. For others, the next staging date (1st January 2016) is fast approaching and preparations need to be in place.
Why is AE preparation so important? Why do you need to care?
Sage has already helped three million employees with auto enrolment. However, hundreds of thousands of the country’s smallest businesses will soon be tackling the administrative burden of auto enrolment and preparation is important to avoid fines, staff confusion and panic.
The Department of Work and Pensions’ recent campaign, is raising awareness of AE and putting the legislation firmly on the agenda for businesses across the country. Smaller businesses need to be prepared ahead of their staging dates to avoid penalties for non-compliance.
From July until September 2015, The Pensions Regulator issued almost four times more auto enrolment non-compliance notices against employers than in the previous quarter. Fines will impact your cash flow and by preparing ahead of time, you can avoid this.
So with auto enrolment now firmly at the top of your resolutions list, how can you and your business navigate the potential minefield of AE and avoid the potential penalties for non-compliance?
Early preparation is key
The good news is that, with a bit of preparation, AE can be straightforward. Ideally, businesses should start to prepare for AE at least six months to a year before staging dates to ensure the right business processes and technology are in place. Software can do much of the heavy lifting, for instance at Sage we recently worked with NEST to launch the Pensions Data Exchange. This new functionality within Sage’s Pensions Module reduces the administrative burden, overheads and potential errors associated with administering AE.
Communicate changes to your employees
Auto-enrolment’s rules make employers responsible for communicating the workplace pension changes and making sure their team of employees are aware of their rights under the new legislation. Small business leaders need to provide their workforce with the correct information in writing, ensuring they are fully aware of their options and manage expectations in advance.
Pick the right provider
Ensuring that you have the right pension scheme in place is vital in terms of providing a quality benefit to your workforce. If you invest your time wisely to research options, it will pay off in the long-term. Business owners who already have a pension scheme in place may think they can automatically use this for AE. However, this should be verified with the pension provider.