With the
in-out-shake-it-all-about Brexit-Euro debate
in full flow, and with Corbyn, Farage, Galloway and a host of others
joining the party too, it’s warming up and yes it can be hilarious for a cheap
5 minute laugh, but let’s face it this is serious stuff, so much depends on the
decision we’re all expected to make very soon and so many business owners are switching off from the pantomime to
concentrate on what the y can control and what’s important to them, the future
for their families and the success of their businesses, and yes, to deal
with their duties under the auto enrolment legislation.
Here's some information that might just help you
to make your mind up.The auto enrolment of all UK
employees in pension schemes was made law in 2008 and came into effect in 2012,
and for small businesses who employed less than 30 people in April 2012 that
date is approaching fast. Around 40% don’t even know what their ‘staging
date’ or deadline date is, this is prevalent if their registered business
address hasn’t been updated or if their address is not their current trading
address, their accountants or an ex-colleague for example.
All UK businesses with
employees that are eligible will have to automatically enrol them into a
workplace pension that the employer has to set-up also. Eligibility is
all workers between age 22 and State Pension age who earn more than £192.30 per
week or £833.33 per month and work in the UK. The Pensions
Regulator recommends that business owners take around 12 months to plan and
prepare for their oncoming duties – most businesses are actually leaving it to
within 3 months, some do not plan at all and miss their deadlines and are now
facing significant penalties (see below).
SMEs, these are typically the
heart and soul and backbone of UK employment with around 1.3M of them seeking
to satisfy their duties in the next 2 years, that’s around 50,000 every month
attempting to squeeze some life out of a less than accommodating market that
has taken what it wants from the masters of industry and is now left with what
it doesn’t really want to deal with, but feels obliged to do so. It’s not
unusual to hear of stories of 90 minutes waiting to be dealt with on the phone
when something goes wrong, or simply waiting for basic information.
Getting things dealt with early has long been the mantra and no more so than
now for the SME businesses. And with Boris and the crew dismantling each
other on their way to the top of their scrap heap then what better time to save
your business an unwanted penalty.
Setting up a pension and then
dealing with the auto enrolment admin. It was recently reported that
the setting up of an auto enrolment compliant pension is a mammoth task and
that the costs associated could be as high as £11,300 in man-hours alone, and
that’s for a typical firm of one to four employees. Of course this only
applies if you want to set up the pension correctly and that entails spending
around 50 man hours in doing so, it appears that most take the much shorter
route which costs far less initially but then far more time sorting out
problems and potentially risking breaches and then paying fines afterward.
Maybe it is time to tune back
into the Boris and David Brexit show? Or maybe to bury your
head in the sand for a while until it all goes away – that is a myth actually,
that Ostriches bury their heads!
Back to Auto enrolment, yes it
is a challenge, it’s a challenge for most business owners – FACT - all of the
fines handed out to date have been to large businesses, with hundreds of
employees. How do we know that? Because the smaller businesses
haven’t even started as yet, plus the Government release this kind of data to
the public every quarter. Over 2,500 penalties were handed out in the
last quarter alone, a more than 400% increase from the previous
quarter. Makes you think doesn’t it? It makes you think that
if the larger businesses with all of their experience and resources can’t get
it right what chance has the smaller business owner got?!
This is a logical thought
process and is understandable. The setting up of the pension should be
fairly straightforward, you would think, if you can get one of the pension
companies to accept you with less than 50 employees. That is becoming
increasingly unlikely, unless you’re willing to pay a hefty fee, then you might
stand a chance, even the so-called super trusts are charging fees now. A
very important factor to consider is that the pension itself only covers about
10% of the legislation – What? Only 10%, so what’s the other 90% cover? The
other 700 – 800 pages cover Compliance, Administration, Record Keeping and all
the dirty stuff that can trip you and cause you headaches and sleepless
nights. You think that VAT is tricky, wait until you tackle this, at
least VAT is only a quarterly headache, auto enrolment has to be tackled every
single time you run your payroll – monthly; then you’re lucky you only have 12
marathons to run, weekly payroll; sorry you’ll be running your little legs off
53 times a year!
David Read, Head of Pension
Policy for the DWP when the new pension rules were introduced stated that for
most businesses the rules were complex and would probably make the uninitiated
scream! Well thanks for that David. It seems totally
illogical to most that these Pension Reforms are treating the smallest UK
employers in exactly the same way as the likes of BT, Sainsbury’s, Vodafone and
Barclays – how can that be right? It probably isn’t to anyone with a
modicum of sense, and yet here we are. And don’t just blame the
Conservatives or the Lib Dems for this, the legislation was born out of the
early 2000’s when Blair, Brown and Labour were in control.
How to assess your employees? Each of your employees must be assessed as individuals and
written to personally to explain how the pension applies to them, then as their
circumstances change and/or more likely when the rules change as they have a
tendency to do each year, then you will need to keep track of each employee and
write to them personally again. All of this information and all records
of pension payments must be kept and made available for the Regulator to call
upon at any time for up to 6 years minimum – great.
All of this is extremely
labour intensive and potentially costly and it is fraught with risk and the
danger of getting something wrong, but hey, the larger companies got things
wrong so why should the smaller businesses expect anything different?
Just worse probably.
Planning to fail or not
planning at all. A recent survey showed that most UK
businesses are aware of their duties under the auto enrolment legislation, but
that’s nowhere near good enough as most people are aware of having to complete
their tax self-assessment by 31st January each year and still over
100,000 every year do not – why? Because of time, because it’s
complicated, because of complacency? All of these may apply but whatever
it is self-assessment is a walk in the park compared to auto enrolment!
For failing to implement auto enrolment you’re looking at an initial penalty of
£400. For continued non-compliance for any reason you’ll then be charged
a daily fine of between £50 and £500 (for a small business), and ultimately
perhaps 2 years in prison may be a necessary punishment to help some to focus
their minds.
Mind focused and firmly away
from European trivia, football and holidays - it is clear to see that SMEs will
have to implement a qualifying workplace pension scheme soon and will have to
plan and prepare and deal with all the associated administration. That being
the case, what are the options for small businesses?
Auto enrolment for the smaller
business (Less than 50 employees) What you should consider when
thinking about your workplace pension and auto enrolment:
1.
Do you have the time to spend reading the 14
manuals containing the relevant legislation and attempting to understand it?
2.
Do you or your staff have the time to spend on
planning and preparing all the vital steps and then to project manage all
aspects through to your start date?
3.
Do you have the experience and knowledge sufficient
to deliver a workplace pension scheme in line with your contracts of employment
and also that will be compliant?
4.
Are you comfortable in handling all employee
communications and answering all their queries and dealing with their options?
5.
Are you comfortable with dealing with the ongoing
processing and administration and ensuring that you will keep up to date with
the future changes to pensions?
If you can answer ‘YES’ to all
these questions – then you will be fine, however on the basis that you may have
answered ‘NO’ to one or more then you may wish to consider outsourcing some or
all of your workplace pension responsibilities to a specialist third-party
provider.
Without previous experience or
knowledge of pensions it is almost impossible to see a way whereby a business
will remain compliant into the future without some form an automated systematic
process or system. Specialist workplace pension providers can help the
small business owner by filling in the blanks and or by completely running the
entire project on your behalf. Corporate Futures offers a completely
unique and bespoke step-by-step countdown schedule which will highlight all the
steps and who needs to take action and by when.
Corporate Futures’ unique
scheduling service offers a comprehensive package which can also include
employee presentations and one2one meetings along with ongoing technical and
pensions support, which means that you can relax and concentrate on what you do
best – running your business.
The ultimate intention of auto
enrolment is to provide greater benefits in retirement for more UK workers, and
whichever way you look at that, if that works then it has to be a good
thing. The problem is in the way the legislation is structured and is
being initially introduced to smaller businesses. By the time 2019 rolls
around, the dust will have settled, this initial period will be long forgotten
and everyone will be getting used to having to contribute a minimum of 8% per
annum!
And who knows, by then, we may still be watching
and listening to Boris and David and the rest of the crew about Europe or maybe the latest worldwide crisis … some
things will never change?!