Auto Enrolment – Is Your SME Ready?
After a recent spike in auto enrolment compliance cases, it’s now more important than ever to make sure your business is getting auto enrolment right.
The Pensions Regulator reports that there has been a significant rise in auto enrolment compliance investigations over the second quarter of this year as staging dates approach. Small firms could be hit with fines totaling tens of thousands of pounds if they fail to comply with auto enrolment criteria.
According to Standard Life, a company with 250 employees that is three months late meeting it’s auto enrolment duties will face a fine of £34,000 on average, in back dated employee contributions. A firm with 100 employees in this instance will owe over £13,000 in contributions.
After the publication of the first auto enrolment report, it was revealed that Dunelm Soft Furnishing Ltd has been forced to rectify an underpayment of £143,000 prompting the regulator to encourage smaller businesses not to make the same mistakes.
4 things you need to know about auto enrolment:
Planning – Before an SME can enroll employees into an auto enrolment scheme, planning and implementation can take up to 6 months. The Centre for Economics and Business Research (CEBR) recently found that it will cost British SMEs up to £28,300 per business and take up to 103 working days to prepare for auto enrolment.
The trouble with NEST – Many SMEs are forced to use the government’s own workplace pension scheme NEST (National Employment Savings Trust) as large pension providers refuse to take on small businesses. Many SMEs are keen to implement a workplace pension that goes above and beyond, whilst there’s nothing adverse about NEST, it’s currently unable to provide employers with any flexibility for what they offer their workforce. In addition to this, NEST currently makes a charge of 1.8% per contribution, this charge may eventually be removed but as it stands, anyone with less than 15 years to retirement will be worse off under NEST.
Fines – According to the Daily Telegraph, research shows that one third of SMEs intend to ignore the auto enrolment legislation. This could result in huge fines of £2,500 per day for employers with 50-250 workers.
Opt Out Rate – Many employers are relying on a high percentage of employees to opt out of auto enrolment. This isn’t a risk businesses should be taking as the current opt out rate is running at 10% and a system must be in place regardless of this.
If your SME hasn’t yet considered auto enrolment, now is the time to start planning for this unavoidable eventuality. Ernest Grant’s auto enrolment service can help your business do just that – we can offer an off the shelf package or a tailored option to suit your business and employees.
