From 2017 all companies will be required to auto-enrol eligible employees into a workplace pension, and contribute to their staff’s pension pot. Many companies have already seen their ‘staging date’ come and go, but there are still more to enrol. While an important move, the smallest businesses may find the legislation tough to handle. For such companies, it is important to plan as far in advance as possible and make sure the costs of implementation are managed well.
Sara Nelson, marketing campaign manager for Sage warns, ’The short-term administrative burden could put a strain on staff resources, there may be confusion among employees and some may opt out.’
Marc Adbo, managing director of software company MagenTys feels there’s a question mark about pensions overall; are they as good as people make out with annuity rates being so low? ‘It all depends on whether it’ll be a good return for employees but it certainly gets people in the mindset of saving for the future,’ he says. While it’s good for employees to be alerted to the importance of saving money, it might be difficult for the smaller businesses to absorb the cost, Adbo continues.
Struggling with costs
Such sole trader type businesses are the ones who could find the costs to be quite difficult to handle, says Sam Roser, director of Intelligent Business Transfer. ‘I’ve heard from a number of business owners that they’ll potentially have to make cuts to existing staff levels. The likely effect on the smallest companies leads me to believe the initiative has not been entirely well thought out,’ he says.
However, he is not so worried about costs for his own business; Roser says he is will be providing more than the minimum pension requirements. ‘We’ll advance our pension scheme so it becomes part of our retention plan for staff as one of our biggest stumbling blocks has been retaining staff as we get bigger,’ he says.
Jeremy Stern, founder of marketing company PromoVeritas says the biggest challenge in preparing for auto-enrolment was selling the concept of a pension to his staff. ‘The average age is 28 and only two of them are married with kids, so they’re not really in the mindset of worrying about what’s going to happen in 30 or 40 years’ time,’ he says.
‘However, they are thinking ‘this might cost me, I won’t be able to go on that holiday or do that activity I’d been planning’, and so there’s a bit of negativity about it.
‘This said, I’ve certainly seen the benefit of seeing a pension pot grow and I will use that to convince them of the benefits.’
Get the right provider
The first thing John McCallion, managing director of Groundscope had to do to prepare for his company’s staging date of June 2016 was to make sure the company was happy with the provider it was working with.
‘The key task has been selecting a provider that can give completely independent advice, some people want to put more money in and some want to put in the minimum. And there’s quite an education to do where we’re going to get the provider to come in and explain how it’s going to work,’ he says.
‘As a small company we outsource our PAYE to make sure we are on top of everything, but with pensions it’s quite an expert field and we need to make sure we’re providing the right advice,’ he says.
Boost Capital can provide funding to small businesses to cover the costs of making the necessary changes, such as for consultancy or accountant fees, investment in new systems and training HR teams. Click here for more information.