Small businesses with little cash reserves face costly cashflow, administration hurdles and potential fines if they are late in setting up a pension scheme for employees under auto-enrolment, according to Standard Life.
The Scottish investment giant estimates that it could cost SMEs up to £34,000 to backdate contributions for just three months – a financial and administrative setback for companies with cashflow constraints.
Moreover, employers may even need to meet their employees’ contributions if the employee is unwilling to do so.
In a statement the firm pointed out a few tips for advisers to help corporate clients to enrol in auto-enrolment.
It advised SMEs to start preparing at least six months ahead of the company’s staging date, and engage early with third parties as employers are likely to need support from payroll and other benefits providers.
The firm also emphasised that the quality of the data and the processes for sourcing are crucial for smoothing the work.
It advised companies to consider salary exchange which can offer significant cost savings benefits.
In addition, existing methods may be suitable if employees already join the pension scheme through their employment contract.
SMEs could consider general regulatory communications, rather than specific regulatory communications to reduce the administration burden, according to the firm.
Jamie Jenkins, head of Workplace Strategy at Standard Life, said: “We understand that SMEs are particularly vulnerable to unexpected costs and large administrative burdens and many do not have the same resources to implement auto enrolment as larger employers.”
Scott Gallacher, chartered financial planner at Leicester-based Rowley Turton, said: “Overall these tips are good, but Standard Life seems to have missed an opportunity to remind people that there are good IFAs willing and able to assist employers. This is especially important as providers like Standard Life are unlikely to be offering any face-to-face advice to them.”
