Simpler AE could benefit small employers

The Department for Work and Pensions is seeking industry views on new draft regulations for auto-enrolment which aim to reduce the burden of implementation and ongoing compliance requirements on employers.

Employers in the UK [could] just get on with running their businesses rather than spending a lot of time and resource on very detailed compliance procedures

Tom Barton, Pinsent Masons

The pensions industry has until February 16 to respond to the consultation paper, issued yesterday, which follows a series of evolutions of auto-enrolment policy since its rollout began in 2012.

In November 2014, the DWP introduced measures in secondary legislation to ease implementation and reduce employers’ requirements, which came into effect from April 1 2015.  

The success of rolling out auto-enrolment to small employers will depend on simplifying systems and processes, said MP members of the Committee of Public Accounts, in a report published last week.

The latest consultation proposes a number of easements for small employers and requests feedback on different areas, including:

• Discretion over the enrolment of company directors, and partners in limited liability partnerships

• Exemption of individuals with tax-protected status

• Compliance easements around re-enrolment and re-declaration of compliance

• Provisions for employers to bring their staging date forward                                                                                              

The government aims to publish a response along with final regulations in early March 2016, to come into force in April 2016.

Ferdinand Lovett, senior associate at law firm Sackers, welcomed the move to allow company directors and partners in LLPs discretion over their participation in auto-enrolment.

“It gives employers flexibility to act as they feel appropriate,” he said.

Tim Smith, senior associate at law firm Eversheds, said the proposals address practical problems for small employers enrolling but have come too late to benefit many LLPs.

“We have been advising clients on [LLP members] for 18 months – they have had to struggle through,” he said, adding that the current legislation across the policy is “horrendously complicated”.

“The legislation is still playing catch up – the fact they’re rushing through the changes is evidence of that.”

Tom Barton, partner at law firm Pinsent Masons, said a “braver and more comprehensive” simplification of the policy would benefit employers across the spectrum.

“Employers in the UK [could] just get on with running their businesses rather than spending a lot of time and resource on very detailed compliance procedures,” he said.

Staying compliant

Compliance remains a major issue for employers who have already staged.

Pension funds are required to re-enrol workers every three years in an attempt to capture those who previously opted out; it is unclear how many employers have gone through the process as many postponed their initial staging date.

In November, Marks & Spencer completed the re-enrolment process without major issues, but other employers are struggling with outdated software, with some having to manually track employees who have opted out, said Saq Hussain, head of defined contribution for the north at consultancy PwC.

“A lot of people auto-enrolled when systems were being developed,” he said. “Often those are not as good as the latest software… there are still some employers having difficulties.”