In October 2012, the UK government introduced its latest measure to boost the number of employees with an active pension. Known as ‘automatic enrollment’, this automatically signs up any eligible employee into a workplace scheme.
Despite some controversies, so far it appears to have been a success. Although initial estimates predicted that around 30% of staff members would opt out, as it stands the figure has been placed at closer to 10%.
To date only large businesses have been forced to comply. Yet the deadline for medium sized businesses is looming. By April 1, 2014, the first wave of firms with between 50 to 249 employees will need to implement auto enrollment. By April the following year, all businesses in this bracket will need to have applied the system. Below are few tips to help your company manage the process as smoothly as possible.
1. Be prepared
The criteria are very straightforward. An employee must be enrolled if they are:
• are aged between 22 and State Pension age
• earn more than £9,440 a year
• work in the UK
This will most likely affect the majority, if not all, of your staff. With this in mind, the scale of the task at hand should be clear.
First make sure you’re aware of your deadline to comply, also known as the staging date. The Pensions Regulator has this tool on their website that will give you the right information based on PAYE number. Octopus HR has also put together a white paper covering a number of issues, including full compliance requirements.
2. Get your data in order
It’s essential that you make sure all your employee records are up to date. Define who is responsible for this role clearly, whether it is HR and or payroll, and follow up to confirm it has been carried out. The better your data, the less problems you’ll have later down the line.
3. Communicate clearly
Good communication is vital. Make sure every department head is aware of the changes coming into force well in advance, and that employees have the information they need to make an informed choice about whether or not they’d like to participate. Again, the Pensions Regulator is a good resource and has provided a number of letter templates.
Don’t be tempted to bog them down with too much information though. This can create apathy – instead, keep to the key points about what automatic enrollment is trying to achieve, and what financial benefits and implications it will have.
4. Keep an eye on cash flow
Recently, a study by Sage found that managing cash flow is the biggest concern for businesses about to implement automatic enrollment. Around 30% of respondents said that they expected this to be a significant problem. Of course, resolving this can be easier send then done, but be sure to keep on top of any potential issues before they escalate. It may also be worth looking into an invoice financing or factoring service if you are not already using one.