Audits can speed up AE’s legal sign-off

If you buy a car without having given any thought to what you want, how you are going to use it or how much you can afford to spend, then it is likely you’ll either end up with something not fit for purpose or have to come back when you have thought about it properly.

The same goes for auto-enrolment advice – particularly as the likely capacity crunch in mid-2014 approaches.

Yes, the absolute number of employees being auto-enrolled is higher this summer than next summer.

But the number of employers reaching their staging dates in May to August 2014 – those with PAYE-defined schemes sized between 62-159 – is a massive 25,500 compared with 650 for the same period in 2013.

This will inevitably put a strain on the availability of the specialised legal advice those smaller employers require and a key part of ensuring they are ready to go at their staging date will be doing the right auto-enrolment homework before seeking advice.

This is also likely to have the knock-on effect of making the advice they receive better value for money.

‘Capacity crunch’ employers should consider the following actions:

1. Establish the range of advice required

Do you have a straightforward workforce profile – for example, employed staff only – or are there more complex categories of staff that must be classified correctly to ensure the auto-enrolment duties are being met? If the latter is the case, it is likely you will need legal input on assessing the workforce. An initial workforce audit, including the different contractual terms currently in place, will speed up this process.

2. Understand current pensions provision in detail

Companies need to come to their legal advisers able to explain which categories of worker currently get which type of pension provision.

Consider whether there is anything unusual in place. For example, employees could have an element of pay that is currently non-pensionable and this may have consequences for certifying the scheme as qualifying under the regime.

3. Software licensing

Your payroll software will need to talk to the pension provider’s software. Extra software contracts will need to be legally reviewed.

4. Draft the comms now

Many of the communications required by the auto-enrolment regime can be done well in advance of the staging date and time spent now building those documents and perhaps tailoring them to your firm’s ‘voice’ will save time nearer to the staging date. It will mean that legal input may be no more than a compliance review rather than drafting from scratch.

In summary, an early pensions and workforce audit will help to put capacity crunch employers in the driving seat for auto-enrolment.

Ferdinand Lovett is an associate at Sacker & Partners