Auto-enrolment has been with us for nearly three years now, but the story is really just beginning. Between 2016 and 2017, over 1.3 million employers like you will reach their auto-enrolment staging date – the deadline by which they must be able to provide a pension scheme to any qualifying worker in their business.
We outline below some of the key considerations that employers must consider in order to ensure that they meet the new obligations in a timely and consistent way:
- Setting the stage: As an employer, you must be ready to comply with auto-enrolment legislation by your staging date. The Pensions Regulator recommends a minimum of nine months to prepare. If you have not already received a letter from the Department for Work and Pensions confirming your staging date, you can find it here.
- Planning makes perfect: Depending on the size of your organisation, you may need support and input from multiple departments. Stakeholders may include management, payroll, HR and finance. The new obligations generally require changes to existing processes and a greater level of communication between different departments and individuals, so it’s critical to identify responsibilities as early as possible.
- Beware the payroll perils: Be prepared to engage your payroll provider as early as possible to establish their support capacities, technical capabilities of managing auto-enrolment and any limitations of their solutions. If you have anything other than a monthly payroll frequency, you may find this part of the project the biggest challenge, so it’s best to think and plan ahead.
- Looks can be deceiving: You may already have a pension scheme, but that doesn’t mean you are all set. Schemes must meet minimum standards, known as ‘qualifying rules’ and, with 1.3 million employers undertaking auto-enrolment, your existing scheme provider may decline to support you or accept new members into the scheme. You should engage with the scheme provider early to know where you stand.
- Know your limits: If you are providing a pension scheme for the first time, it is important to understand and quantify the time and cost impact on your business. Extra work will be required to meet the rules and you may want to consider outsourcing. The financial impact will vary according to your chosen contribution structure and will increase over time, so it pays to understand the impact now for the benefit of budget certainty.
- Be in it to win it: As an employer competing for talent, you may want to find out what your industry competitors are providing for their employees. This ‘benchmarking’ process can ensure that you do not lose talent to a competing employer at a time when pensions and benefits have been placed firmly in the spotlight.
- I spy: A key duty under auto-enrolment legislation is to identify each kind of worker in your organisation and understand how your organisation’s legal structure can impact upon your obligations. You should make sure that you can readily identify workers across multiple payrolls, zero-hours contracts, secondees, overseas workers, contract workers, non-executives, individuals with fixed protection tax statuses and members of limited liability partnerships.
- Don’t over-benefit: You could find that auto-enrolment entitles scheme members to other benefits, depending on your standard contract of employment and eligibility rules. Many employers have needed to review these as benefit entitlement has very often been linked to active membership of a pension scheme.
We hope that you find these points a useful reminder. If you believe that you require support with auto-enrolment, or any pension or benefit-related matter, please contact your usual RSM adviser who will be delighted to assist you. Alternatively, if you don’t have an adviser and wish for us to contact you, please complete your details here.