Many of the 1.8 million small employers are at risk of missing their pensions enrolment deadline, financial adviser Lighthouse Group warns.
Tens of thousands of SMEs and micro employers are now starting to grapple with the complexities of employer pension schemes for the first time.
The Pensions Regulator recently stated that only 29 per cent of those staging in 2016 were fully aware of their date and only 46 per cent of those staging in 2017 were aware of their responsibilities.
Pensions expert Roger Sanders, managing director of Lighthouse Group, advises business owners to familiarise themselves with the requirements and assess their business as soon as possible, even if their staging date is two years away.
Sanders says that employers’ auto-enrolment duties go far beyond setting up a pension scheme and enrolling staff in it.
‘They must assess their workforce, work out who to enrol and decide how much they and their employees will contribute. They also need to keep records of all this information, together with any changes, all of which represents a significant amount of work for smaller employers.
‘However, we are finding many businesses lack the accurate, up-to-date information on employees vital to completing enrolment smoothly. Firms that leave their enrolment preparation too late will be in for a shock when they discover years of payroll and employee data needs to be sorted before they can properly begin.’
Lighthouse advises that employers who use a payroll bureau should ask whether their systems and software are geared up to deal with auto-enrolment, assessing if they can extract needed information easily, in a suitable format, and on a regular basis.
A payroll bureau generally holds information such as an employee’s full name, their salary or wages and National Insurance number, but may not have the employee’s address and other contact details such as email, which is often held by the employer.
However, under auto-enrolment all this information needs to be brought together each time an employee is paid, whether monthly, fortnightly or weekly.
SMEs should begin the process at least six months before their staging date, starting with checking what data their payroll function holds and how to export it, as well as what information is missing and must be tracked down.
At three months before the staging date, businesses must have a process to collate all the information needed in a suitable format and on a timely basis. Data must be in a standardised format and should cover all employees, even if they will not be enrolled automatically.
Sanders says that the data challenge doesn’t end once everything is in place. Businesses also need to run a data check for every pay period, to verify employees’ eligibility criteria, new joiners and contribution levels.
This will ensure that any employees who become eligible later are enrolled, for instance because their earnings have increased or they have reached the age of 22.
‘Automating as much of the data gathering, collating and transmissions as possible will significantly lower both the margin for error and the overall cost to the business. Choosing a pension provider that offers locally-based support in person as well as from an administrative centre will also make all the difference,’ Sanders adds.
‘While there may be a small additional cost, being able to concentrate on running their business while knowing they are meeting the requirements, and are therefore unlikely to be fined, can make it worth every penny for SME owners.’