The staging process for auto-enrolment is about to increase in breadth, but small and micro employers may not be adequately prepared for the change, according to a report from pension-provider Nest.
Of employers yet to stage, 83 per cent do not yet have an active scheme in place; and although 91 per cent of small employers (with fewer than 50 employees) and 85 per cent of micro employers (one to four employees) are aware of the reforms, only 18 per cent feel they completely understand what it means for their business.
Around 43,000 employers have staged so far, and 45,000 are scheduled for 2015. But by 2016, 45,000 employers will be staging each month, and 2017 will see this number grow further.
David Nash, senior policy advisor at the Federation of Small Businesses, said, “There is a discrepancy between awareness and understanding. Only 18 per cent of micros understand how it will affect their business and not all will have the payroll software they will need. There needs to be clear, free guidance, and compliance costs need to be kept low so contributions can be increased.”
Despite the lack of readiness, employers reported that they support auto-enrolment and 66 per cent of those using Nest believe that workplace pensions are important. Support is high among small and micro employers as well - 86 per cent and 75 per cent respectively stating that in principle auto-enrolment is a good idea.
Renny Wickham, senior manager at Mazars Employee Benefits Limited, said, “A number of employers staging don’t understand how many others are too. Employers need to start planning 12 to 14 months before their staging date.”
Mr Wickham used the analogy of going into a station and realising how many other people are buying tickets. Employers don’t realise how many others are also implementing their scheme.
Some tickets buyers will purchase a standard ticket, while others will opt for first class. Some employers will pay the absolute minimum when setting up auto-enrolment, while others will put greater detail into their system.
Demand for help remains high – 74 per cent of small and micro employers expect to turn to an intermediary, while 59 per cent are likely to ask an accountant for help and guidance, rising to 70 per cent of those with only one to four workers.
However, only 67 per cent of accountants say they know a lot about auto-enrolment compared to over 90 per cent of independent financial advisers and payroll bureaus.
Tim Jones, chief executive of Nest, said, “As it becomes relevant, the particular parties become aware. That time is coming for accountants.”
Only 22 per cent of accountants have finalised their auto-enrolment proposition, in contrast to 46 per cent of IFAs and 56 per cent of payroll bureaus.
Employers likely to turn to accountants for auto-enrolment advice weren’t affected at first, as the earlier stages didn’t apply to businesses with 50 workers or fewer, which make up 90 per cent of accountants’ clients.
