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Costs
25 Nov

2 Out Of 3 Employers Say Auto Enrolment Has Increased Costs – But There’s Good News Too!

 Costs

Recent joint research into the effect of auto enrolment from Employee Benefits and Close Brothers Pensions has found that 66% of businesses have experienced higher costs as a result of auto enrolment. Despite the increase in expense, however, businesses are seeing positive results too.

 

It is no surprise really that two-thirds of employers have experienced increased costs to their business as a result of the UK’s auto enrolment rules. As Coldplay would point out, “Nobody said it was easy” when it came to auto enrolment compliance. Fortunately, though, it doesn’t appear to have been too hard either with 37,000 employers having already completed automatic enrolment successfully, while just five have been fined for serious failures to comply.

 

Where have the increased costs come from exactly?

The increase in costs associated with auto enrolment may have come about for a number of reasons and the data from Employee Benefits and Close Brothers sheds some light on what extra costs businesses have faced as a result of the auto enrolment rules.

As can be seen from the below table taken from the research, 28% of businesses brought in additional systems or providers in order to comply with auto enrolment, while 7% have had to hire additional resources in order to manage. Here at DAM, we’ve seen first-hand the strains that auto enrolment can put on businesses, both in terms of the expense and the workload. Many businesses haven’t realised just how much work auto enrolment compliance requires.

To do the necessary work for auto enrolment in-house has been estimated to take up a massive 103 working days of staff time and there’s certainly an indirect cost for that. That’s the main reason many of our auto enrolment clients came to us for auto enrolment advice – it was simply cheaper to outsource the work than spend over a hundred days doing it themselves!

On top of that, the simple cost of the pension contributions will have increased expenses for businesses given that many workers who may previously never have been entitled to a corporate pension have suddenly been given the opportunity to benefit. 

AE Table

What good news have businesses reported?

Before business owners yet to stage get too downbeat, the survey hasn’t been all doom and gloom and the research has also shown quite a few positives for businesses as a result of automatic enrolment.

41% of employers have seen staff save more themselves into their pension pots and this is resulting in a more engaged workforce with 30% reporting staff feeling more engaged in their pension scheme and the way it is run. As is a common theme on this employee benefits blog, increased employee engagement is only ever a good thing!

On top of that, communication with employees has improved too with 42% of employers have introduced wider communications around pensions.

 

So all in all auto enrolment is proving to have costs and benefits and that shouldn’t come as a surprise to anyone. Now that small businesses are the ones having to stage, the automatic enrolment journey is entering an interesting time.

Without HR departments, those 103 working days could hit small businesses hard and we’ll all have to wait and see how they cope and how it impacts on their costs. Reports have already shown that three out of four small businesses expect to seek regulated auto enrolment advice, but there could be tricky times ahead for the quarter which doesn’t.

 

Photo credit goes to Images Of Money

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