What small business owners need to know about auto enrolment

As a small business owner, you have many things to worry about: if it doesn’t boost profits, you likely don’t want to think about it. 

Whatever your vision for your company was at the beginning, it probably didn’t involve spending a lot of time and money on auto enrolment. At Sable, our SME clients tend to think of it as arcane, resource-intensive, and not at all helpful in terms of operational management.

They’re right: it’s all those things and more. It’s also not optional – and if you don’t auto enrol your employees in good time, this minor inconvenience could snowball into a significant problem. Staging dates vary: have a look at our deadline table to find out yours.

 

What is auto enrolment?

Auto enrolment is fundamentally a good thing. In practical terms, it just means your company has to register any employee between 22 and state pension age (and earning £10,000+) on a workplace pension plan.

For employees, auto enrolment broadens access to pensions and absolves them of all administrative responsibility. Unfortunately for employers, it’s now their burden to bear.  

If this doesn’t sound like much fun, it isn’t. You’ll either want to make sure you have a solid strategy in place – or prepare for the consequences.

 

What happens if you don’t auto enrol your employees?

Here’s the scary bit: non-compliance can lead to escalating financial penalties. The initial fine is around £400, but if employees aren’t enrolled after a certain period of time, you’ll have to pay daily charges. If your agency employs 1-4 people, you’ll fork out £50 per day; for 5-49 people, the penalty is £500; if it employs 50-249, this figure becomes £2,500.

This can have a disastrous effect on a small business.

 

What do businesses need to do

Helpfully, everything you need to know can be found in this useful document from The Pensions Regulator. Unhelpfully, this document is over 670 pages long. When you’re under pressure from shareholders and customers, it’s hard to find time for that kind of reading.

Once you’ve read it, you need to assess each employee – levels of pay, contracts, all sorts of minutia – and find a pension scheme that can accommodate them.  

 

What can businesses do about auto enrolment?

If you have the internal resources needed to achieve compliance in the required timeframe, go for it. Otherwise, it may be worth enlisting the aid of a payroll-savvy financial adviser. Your auto enrolment strategy needs to be created and executed in parallel with business-oriented, revenue-generating activities. If you believe you might not be able to accomplish this, it’s probably safer to outsource it.

Some degree of frustration is understandable: it’s a law designed for employees, not employers, after all. In the long-run, however, it will go some way towards providing pensions for every one of your employees – and if you’re a good boss, you’ll be inclined to protect their interests anyway.


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