Businesses 'under pressure' over auto-enrolment costs

Businesses 'under pressure' over auto-enrolment costs

Three quarters (75 per cent) of companies report an increase in costs as a result of pensions auto-enrolment, a survey from the British Chambers of Commerce (BCC) found.

Nearly a quarter of the respondents (23 per cent) indicated a "significant" increase in costs, the research showed.

Auto-enrolment was launched in October 2012 and by 2018, when the roll-out is complete, it is expected up to 11m people will be newly saving or saving more as a result.

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But Jane Gratton, head of business environment and skills at BCC, said businesses are "under increasing pressure" from the burden of employment costs and she said this would influence the choices they make and outcomes for employees.

She said: "Higher employment costs impact on the bottom line and reduce the resources available to invest in the business and its people.

"Employment is just one element of the high upfront cost of doing business in the UK.

"It is the cumulative impact of all of these changes, and the pace at which they are being introduced, that causes the greatest concern and poses the biggest risk.

"There is little scope for firms to absorb any further costs without there being damaging effects on competitiveness, growth and opportunities for people in the workforce. The government must ensure that there are no upfront further costs or taxes on businesses and entrepreneurs for the remainder of this parliament."

The government has announced the minimum automatic enrolment contributions will increase to 5 per cent in 2018 and 8 per cent in 2019.

A total of £17bn a year will be going into workplace pensions by 2019 to 2020 as a result of auto-enrolment.

BCC also highlighted the Apprenticeship Levy, the Immigration Skills Charge and the National Living Wage as examples of increasing costs of employing people.

BCC’s annual workforce survey, held in partnership with Middlesex University London, surveyed 1,461 businesses from all regions of the UK.

Of the businesses surveyed, 94 per cent were SMEs, 29 per cent operate in the manufacturing sector, and 71 per cent operate in the services sector.