Top tips for small employers readying for AE

The Pensions Regulator has recommended employers begin their planning 18 months in advance of their staging date, but it seems their pleas are largely falling on deaf ears. 

Auto-enrolment is looming large on the horizon. Starting in January, businesses with fewer than 58 employees will reach their staging date and by the third quarter of next year, those with fewer than 30 staff will be captured by the legislation.

In total, more than 46,000 companies will stage next year and the numbers swell exponentially in 2016 with 512,000 staging. 

But research we conducted with 450 small and medium-sized companies earlier this year revealed that 44 per cent have not given any thought to how they will go about finding a provider for auto-enrolment, while more than a fifth plan to rely on their existing provider. 

This relaxed attitude was confirmed by financial advisers, with nearly three-quarters of the 244 we questioned in August saying that employers are coming to them for advice either very close to, or after, their staging date. 

Leaving auto-enrolment to the last minute will inevitably result in more limited provider choice, increased administrative pressure and unnecessary stress. The simple truth is, the longer businesses allow themselves to implement the changes, the easier the process will be. 

Don’t make any assumptions

Companies planning to rely on their existing provider should speak to them early to ensure the scheme qualifies for auto-enrolment and to confirm whether that provider is willing to extend it to all employees on the same terms. 

A staggering 93 per cent of advisers say pension providers are cherry-picking auto-enrolment business, and the upshot of this is that day after day we hear from companies who have been let down at the last minute. 

For small companies introducing a workplace pension for the first time, it probably pays to seek an adviser who can help identify a value-for-money scheme that is suited to that company’s workforce profile. 

While selecting an appropriate scheme is imperative, payroll providers also have a very important role to play. 

Companies with outsourced payroll arrangements should contact them as soon as possible to find out what auto-enrolment support they offer and which pension providers they work with. 

By selecting a pension provider that is already integrated with their payroll provider, firms can avoid unnecessary hassle and expense. So making enquiries early on is time well spent. 

Cleanse your data

One of the biggest stumbling blocks with the auto-enrolment process is inaccurate or incomplete payroll data.

Taking time to ensure that data is complete and entirely up to date will help avoid problems during the implementation process and beyond.

Where possible, companies should try to obtain email addresses for all staff, as issuing communications about auto-enrolment via this route is often cheaper and more efficient than post. 

Can you give more than the minimum?

Nearly one in five SMEs we surveyed said they plan to contribute more than the legislative minimum.

More than half of those planning to pay more believe doing so will help with the recruitment and retention of employees.

This approach makes sense as high levels of staff turnover can act as a hidden drain on an employer’s profitability.

In fact, research we conducted with 2,000 employees found that behind holiday entitlement, the quality of the pension is the benefit employees value the most, with high employer contributions top of their wish list. 

So while auto-enrolment is a legal obligation, employers can view it as an opportunity to offer a benefit that will help attract and retain employees. 

Approaching auto-enrolment can feel daunting and there are a lot of things to consider, particularly for companies that have never set up a pension scheme before. But a little planning can go a long way and taking a thorough approach will pay dividends. 

Morten Nilsson is CEO at Now Pensions