Preparing for Auto-Enrolment
The auto-enrolment pensions legislation places a range of new duties on employers. These duties start from each firm’s Staging Date and then apply each and every time you pay your staff.
Employers will have to pay into a pension scheme on behalf of eligible staff, with the employer contributions rising to 3% of pay by April 2019. This will mean new costs for business. But getting started will be a cost in its own right.
A study by the Centre for Economic Business Research found that preparing for auto-enrolment would cost even the smallest business on average £8,900, rising to £15,600 for a typical medium-sized firm.
Our check list to highlights some of the key steps and decisions a firm will need to take.
- Involve an adviser such as David Williams IFA right from the start. There will be a cost but the alternative is to invest a huge amount of your valuable management time to discover what we already know.
- Find out your staging date. We can help you with this.
- Start planning for the change at least a year in advance of this date. There are likely to be some complex business decisions to take.
- Find out how much it will cost to make pension contributions for your particular workforce. Has this been built into your budgets? Are there knock-on implications for future pay awards?
- Think about what sort of pension you might want to offer. With hundreds of thousands of companies having to set up new arrangements over the next few years, demand is high and some of the best pension options require firms to sign-up at least six months in advance.
- Check that your payroll systems are up to scratch. Some employers are changing payroll providers or even switching from weekly to monthly pay to ease the burden of automatic enrolment.
- Decide what you will tell your workers about their new pensions. The rules require some compulsory letters to staff but many firms want to do extra communications both before and after the pensions launch to smooth the process.
- Check whether your employment contracts are fit for purpose. For example, do you want to change your contract of employment to automatically join everyone into a pension when they start work?
- If not, think about how you will handle new staff. Any existing probationary period may not run in harmony with your new duty to join that employee to a pension.
- Understand that you will have to register your organisation with the Pension Regulator and keep very specific records for several years in case of a future inspection.
For more help in understanding the challenges of the new pension rules contact David Williams IFA today on 01604 621302.