Some 45 per cent of small businesses are confused about auto-enrolment rules obliging them to enrol employees in a qualifying workplace pension scheme.
The study by the Federation of Small Businesses (FSB) also finds that three quarters of small businesses feel the regulations would put too much pressure on them, and that one in four think their business might not cope with the added financial demands.
The news comes just as auto-enrolment activity ramps up, with a tidal wave of enrolment and re-enrolment hitting the business community all over the UK.
The Auto Enrolment Advisor, set up to help guide company owners and directors through the auto enrolment process, says the report’s findings stressed the need for small businesses to be prepared.
Graham Robinson of the Auto Enrolment Advisor says that, typically, small, micro and medium-sized enterprises (SMEs) have less awareness of issues such as auto-enrolment due to their size.
‘They don’t have in-house human resources departments to manage the process, like many of the early employers who met their obligations. So to negate this, early preparation is critical.’
Robinson warns that smaller employers may face another issue too; what he calls ‘the capacity crunch’.
The government’s auto-enrolment rules were rolled out in 2012, with only large employers affected at first. Over the next two years more than a million SMEs will be complying with the regulations. Tens of thousands are expected to comply, or ‘stage’, each month during 2016 and 2017, and more than 500,000 employers are due to stage in 2016 alone.
Robinson says that the number of schemes registered is rising sharply, with the peak expected to be August 2017, but that 2016 is set to be an exceptionally busy year too.
‘Added to this, the first employers to tackle auto-enrolment in 2012 will be the first to implement re-enrolment, which may put further strain on the administration process of the providers.
‘The auto-enrolment ‘tsunami’ that experts have been predicting has started. Our advice to SMEs is to seek proper legal advice and start the necessary processes as soon as possible.’
Although 51 per cent of businesses think they can meet the challenge of the new workplace pension, 26 per cent do not know their staging date, according to the FSB findings.
Robinson says that increased media coverage surrounding auto-enrolment, coupled with the Department for Work and Pensions’ recent ‘Workie’ advertising campaign, makes him confident that employer confusion surrounding auto enrolment would diminish.
‘However, it should be stressed that the earlier they speak to someone the more the advisor can help them with their enrolment,’ he adds.
Further reading on pensions