All employers have to provide a workplace pension for their eligible staff by 2018. This process is called ‘automatic enrolment’, and is often referred to as ‘auto-enrolment’.
Avoiding the topic is not an option, so it’s important to be aware of what is required and by when. Otherwise, you may make mistakes which could lead to a hefty fine of up to £500 per day.
“Avoiding the topic of pensions auto-enrolment is not an option”
As a business owner, there is initially a lot to contend with for pensions auto-enrolment, so here is a list of the most common mistakes and more importantly, how to avoid them:
Mistake 1: Putting off dealing with auto-enrolment ‘until you have time’
The topic may be boring to you, but The Pensions Regulator expects you to be up to speed with your obligations. Start by looking at their website for an outline of what you are required to do, and by when.
Once you know what’s in store, you will find the process less daunting.
Mistake 2: Thinking you have to do everything yourself
You don’t. You can employ professional help, such as your accountant or an employee benefits consultant, but they are likely to have an attaching cost. You can, as an alternative, look for support from a specialist platform, such as bob, which will lead you through the process.
“You can employ professional help or use a specialist platform, such as bob”
Mistake 3: Ignoring letters from The Pensions Regulator
The Pensions Regulator has the power to impose fines of up to £500 per day if you do not act on letters and instructions from them. When you receive a letter from the regulator, read it and act on it, otherwise you may be breaching regulations which can escalate to the point of being fined. In some instances, for continuing breaches, the fines can run into thousands of pounds.
Mistake 4: Expecting your accountant or payroll supplier to deal with everything
If you are going to arrange for your accountant or payroll supplier to deal with your auto-enrolment, you must not only brief them but importantly ensure you have an agreement with them. This should include their responsibilities and yours (as the employer), clearly set out in writing at the outset and with agreed payment terms.
“As the employer, you remain responsible for auto-enrolment deadlines & compliance”
Remember, even if you do delegate tasks, you as the employer remain responsible for deadlines and so you need to be sure that they have the correct instructions and capability to act on your behalf.
Mistake 5: Failing to check that your payroll software is compatible
You should have a shopping list of requirements for the payroll system that you use, including:
- Will it support you chosen auto-enrolment provider?
- Will employee assessment and enrolment be automated?
- Will it make contributions and deductions automatically?
- Will it allow you to produce the required reports in the format that you need and want?
- Are the costs all-inclusive, or are there extra charges for different aspects of auto-enrolment?
Mistake 6: Signing up with an auto-enrolment provider without proper research
There are now a considerable number of auto enrolment-providers in the market, so you owe it to both yourself and your employees to do your homework and make a proper comparison.
To do this effectively, you should list out your requirements and then see if each provider can fulfil them. At the expense of stating the obvious, cost is not the only (or most important) factor.
“Cost is not the only factor in choosing a provider”
Mistake 7: Failing to communicate effectively with your employees
Having succeeded in setting up the right pension scheme, you don’t want to find that the take-up is less than you anticipated because your employees didn’t fully understand, or appreciate, the benefits.
Your employees are your most important, and often most costly, asset, and auto-enrolment is an opportunity to build and enhance employee motivation and retention.
The Pensions Regulator sets out what you are required to tell your employees, but many companies go further and offer broader education on pensions to their staff.
Mistake 8: Forgetting to submit a Declaration of Compliance
If you have succeeded in implementing your workplace pension scheme you have up to five months after your staging date to submit your declaration.
You therefore need to ensure that you meet the time limit, and although you have five months to do this, you should aim to submit the checklist as soon as is practical. In short, don’t leave it to one side; just do it without delay.
Mistake 9: Thinking that auto-enrolment is a one-time activity
When you auto-enrol that isn’t the end of the process. At every payday, eligibility is assessed again, and employees who have now qualified (based on age and earnings) will be enrolled.
Employees also have the right to opt out of the scheme; you are obliged to re-enrol these people every third year after your scheme begins. Even if no-one has opted out, you will need to complete a re-declaration of compliance to tell the regulator that you have complied. Remember, re-enrolment and re-declaration is your legal duty and if you don’t act you could be fined.
“It’s not one-and-done. Eligibility must be re-assessed at every payday. Opt-outs must be re-enrolled every 3 years”
You therefore need to either have a system in place to automatically remind you, and/or ask your contracted advisers to assist you.
Mistake 10: Failing to co-ordinate your HR and benefits
Auto enrolment has and is seen by some companies as a discrete or separate exercise, somehow divorced from their day-to-day dealings with employees.
Auto-enrolment is more likely to succeed if it’s integrated within your HR system and processes – especially in terms of employee engagement. There are numerous HR systems out there but only a very few can offer a coordinated approach with auto-enrolment. bob is one of them; why not have a look? www.hibob.com
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From Roderic Rennison
Roderic Rennison is an advisory board member at hibob. He is a Chartered Director with over 40 years financial services experience in a wide spectrum of roles including sales, product development, product procurement, provider management, strategy, corporate activity – acquisitions and integration, regulation, regulatory change and risk. When not helping great companies to become even better, he writes for his own blog