Action plan required for new employer duties
Winston Churchill once said "Let our advance worrying become advance thinking and planning". The same can be said about the snappily-titled "automatic enrolment employer duties" that will progressively be brought into force from October 2012.
Unfortunately the likelihood is all employers will face additional cost and administration burdens under this new pension regime. The good news is that there is still time to plan and prepare, but time is running out. There are four basic steps that can help you plan.
Find out when the staging date is
This will give you your deadline for implementation and a point to work back from. Your staging date will be based on the number of people you employ as at 1 April 2012 or, if you employ less than 50 people, the last two characters of your 'Pay As You Earn' reference.
The dates are spread over five and a half years between October 2012 and February 2018. Larger employers will go first, smaller employers last. View our summary table to find out your staging date.
Find out the duties that are likely to apply
Every employer in the UK will have some duties to perform but exactly what you'll need to do will depend on the types of worker you employ.
As a rule of thumb, any worker over age 22 and under state pension age, and who earns more than £8,000 a year, will be treated as an 'eligible jobholder'. You'll need to automatically enrol these workers into a suitable pension scheme and as long as these workers stay in the pension scheme, make contributions on their behalf.
You'll also have to provide a pension scheme for workers who don't fall into this category and in some cases pay into it.
Review pension provision
Even if you already offer some form of pension provision you'll need to make sure that the existing scheme meets a minimum standard. This generally means that there must be a minimum contribution rate, made up of both employer and employee contributions. If the scheme isn't up to scratch, contributions will have to increase.
Building up these contributions to the minimum standard slowly might be preferable to waiting until the last minute and facing a high up-front bill. If you don't have a pension scheme you'll have to set one up sooner or later. Again, starting to do this as early as possible will allow you to build the scheme up at your own pace.
Consider the impact on the business
There is no doubt that automatic enrolment will have cost implications for every employer, large or small.
You'll need to consider how you'll meet these costs.
- Can you simply absorb the costs, potentially reducing profits?
- Will the costs of your goods or services need to increase?
- Will staff remuneration structures have to change?
- Will HR processes and systems need to change?
- Will business plans need to be adjusted to reflect the increase in costs?
About the author:
is a Business Development Manager at Scottish Life with more than 20 years’ experience in the pensions industry. He is currently involved in analysing the automatic enrolment requirements and helping employers understand the impact.
These are just some of the questions that you'll need to address. Planning ahead, well before the staging date, could help smooth any cost increases, avoiding last minute shocks.
What is clear is that you'll face a major challenge when your employer duties start. With the economic climate as it is, it's probably even more important to plan as early as possible. It won't be easy.
But perhaps Mr Churchill can again offer some wise words: "If you're going through hell, keep going!"
Business Development Manager
Published April 2012