Pensions  

Auto-enrolment rules slated by small businesses

Auto-enrolment rules slated by small businesses

One in five small businesses claim auto-enrolment will force them to lay off staff or freeze pay, with many more saying it will reduce profits and see prices rise for customers, a survey by the International Association of Book-keepers has found.

Of 130 accountants and bookkeepers surveyed, 20 per cent said their clients feared the new regime would eat into already slim margins and force them to pass on the losses to their workforce.

That was despite the fact that the mandatory employer contribution is currently a modest 1 per cent, and is due to increase to no more than 3 per cent by 2019.

Article continues after advert

Auto-enrolment is currently being rolled out to the nation’s smallest businesses, with every single employer due to be under the regime by 2018.

Respondents were asked, “How are your clients off-setting the additional cost of automatic enrolment?” The most common answers included, “Taking it on the nose”, “Passing it on to customers”, and “Holding back on pay rises”.

The mood of answers were consistently gloomy.

One accountant said: “One client has had to make two redundancies and others are cutting hours as a direct response to automatic enrolment and the new living wage.”

Another said: “Small clients are struggling to offset it against anything and are really struggling with the additional cost and are already concerned about the percentage increases.”

A third said simply: “They are not, it is an additional burden.”

The responses demonstrated auto-enrolment, rather than being seen as a benefit for their employees, is being viewed by smaller businesses as an imposition by the government.

They also demonstrated the unpreparedness of many microbusinesses for their looming staging dates.

One respondent said: “Most [clients] are small sole traders who employ staff and though they have been advised and given plenty of information they don’t fully understand all the implementation costs.”

Malcolm Trotter, chief executive of the IAB, said the findings were reflective of struggling business owners across England and Wales.

“Whilst the government, through its agencies, is making some efforts to inform businesses about these new obligations, it would appear that many micro and small businesses feel that it isn’t doing enough to support them in either a financial or educational capacity, particularly as many of them are still fighting to find their footing after the recent recession,” he said.

Claire Walsh, a financial planner with Aspect8, said the negative attitude towards auto-enrolment would have a flow-on effect on smaller firm’s employees, who often rely on their employer to give them appropriate financial guidance.

She said: “Big corporates are doing it [AE] very well, but now it is coming down to small employers, and a lot of the people who are implementing these schemes are themselves not very engaged.

“I’ve got friends who run small businesses, and they see it as a tax. So they’re not going to be engaging their employees.

“We know historically that a lot of people put a lot of faith in their employers to give them financial information.