Business Problem Solvers and Chartered Accountants

Small businesses prepared for auto-enrolment

Auto enrolment will soon be upon every business – we can help by identifying your commencement date – please call us! Meanwhile here is a case study from www.smallbusiness.co.uk

13.11.14 STICKY NOTE PICWith one in seven retirees leaving work without any form of personal pension, the  auto-enrolment initiative – in principle – shows proactivity on behalf of the government.

But with such a monumental change to our pensions system now fast approaching, the big question is: are small businesses equipped for the big switch?

John McCallion, managing director of ground transportation platform Groundscope says, ‘In general I think there is too much regulation for small businesses to contend with and employment law is too complicated. Morally auto-enrolment is a good idea though, in line with the duty of care that companies have to show to employees.

‘Although it’s more cost to the payroll the money is going to my staff so overall I think it’s a good idea. You can’t work in a company for 20 or 30 years and not have a pension. We just want to make it as bureaucracy-free as it can be.’

The first time the intiative came on Sam Roser’s radar was early 2014. The director of the consultancy Intelligent Business Transfer had grown headcount over previous years. ‘As your staff base grows the pension contribution obviously becomes far greater so we started planning at the start of that year.

‘Our enrolment date is August 1st 2016 and we’ve budgeted for an internal HR manager with pensions experience to join us at the start of next year.’

Blog 13.11.14However Jeremy Stern, managing director of promotion company PromoVeritas won’t be waiting for his staging date to offer pensions to his staff. ‘If it’s a good enough deal we felt we should offer it to them before that. Just this month we’re launching private healthcare for our staff through a subsidised deal and maybe by the end of the year we’ll be offering them the pension scheme as well.

In terms of how McCallion has prepared for the initiative, he reveals he tends to do a one-year and three-year business plan every December so has been factoring in the costs for this scheme.

‘It adds about 1 per cent of our costs in 2016 and by 2018 it’ll be about 3 per cent additional cost on our payroll.

‘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.’

Marv Abdo, managing director of software testing company MagenTys, hadn’t heard of auto-enrolment until he was told about it by my financial adviser just over a year ago.

‘We offer a pension to all of our employees anyway, but we were a bit naive in that we offered on average 3 per cent of their salary and didn’t insist on them contributing to it themselves,’ he says.

A lot of MagenTys’s staff are quite young so their interest in pensions and share options is not as strong as the older employees, Abdo says. ‘There are one or two more senior staff for whom the pension is an important factor and those people wanted to negotiate how much of their pension we would contribute,’ he adds.

dreamstime_s_27513341Sharon Gibb, finance manager of franchise Premier Coffee, took advantage of on-site training from Sage and an automatic enrolment expert visited the office to take the payroll team through what it needed to do. The training was a great success, she says, as the team were able to learn together and ask questions as a group.

‘The payroll team used the Sage Pensions Module to assess the workforce and automatically enrol them into the pension scheme, communicated with all of the employees and sent the data and payments to NEST,’ Gibb adds.

‘The process was a great success as the team were able to learn together and ask questions as a group.’

Further reading on auto-enrolment