Auto Enrolment - the five step plan
Has the task of sorting your company’s auto enrolment compliance fallen at your feet?
Did you forget to duck when the pensions boomerang came spinning through the air?
Did you get the pensions gig because, well there isn’t anyone else around that can sort it apart from you?
You have our commiserations.
Workplace pensions have been dominating our work lives at DAM for three or four years now so we have a fair idea of what you are looking at. True, we don’t know the personalities you are dealing with, the systems and processes you use or how much time you can devote to the task. However we know enough to give you a few short pointers to get you up and running.
The biggest pain about auto enrolment is the grunt work involved in running an assessment on every payroll run and keeping a record of it. There is also a responsibility of the employer to monitor people who opt out so that they are re-enrolled in three years' time. Companies that have a decent payroll system will find that this is all done automatically.
If your payroll solution doesn’t do all the calculations, record keeping and reminders automatically, we suggest that you go find!
2. "We're sorted"...(oh no you're not)
We’ve heard this one a few times – “our company has had a pension scheme in place for years so auto enrolment is already sorted”.
Many companies fall for this mistake and it's a painful one. Very few existing company pension schemes are fit for auto enrolment purposes. They can be on the wrong salary basis or they might require employees to sign up and select a fund. There are lots of reasons why your current solution won't fit but even more importantly, there is a strong chance that your existing pension provider will say “no thanks” when you try to bring all your staff in.
Check it out early if your current scheme can be used as a qualifying scheme for all staff. If it can't, you'll need to be on the lookout for another one. That will mean either running two schemes (the new and old one) or consolidating everything into the new one.
3. Prepare for the questions
Even if they haven’t asked you yet, chances are that your employees know this is coming and are wondering what it means for them. You need to be ready to engage with them and this is best done proactively (horrible word!). A message with the wage slips, a letter from the head honcho, waving the auto enrolment flag in staff meetings, providing managers with a holding statement – we could go on (and often do...).
Every company is different but all employees like to feel consulted and informed and it doesn’t take much to turn this burden into a positive story.
4. Panic not...
The headline cost of 1% of salary (rising to 2% and 3% in a few short years) can put a panic in the heart of any financial controller or budget holder. So it is important to remember that it isn’t quite that bad. Auto enrolment only applies initially to employees between 22 and state pensions age who are earning more than £10,000.
The minimum % is actually based on qualifying earnings which is earnings between £5,824 and £43,004. If some staff decide to opt out, that brings the cost down a bit further but remember you cannot encourage that in any way.
The facts and options around the cost issue are more complex than we can cover in this extremely short summary but we wanted to give you a feel for the issue in a nutshell.
Were you planning on waiting till nearer your staging date? If you value your sanity, don’t. Even small companies need a minimum of six months to do this properly. Start your project early. When you get things underway, you will more than likely say the same thing as everyone else – “I didn’t realise there was so much to it”.
Finishing on this point also allows us to give our own little DAM trumpet a toot. In most cases, we can make this journey easier. Our sweet spot is helping businesses to not only comply with the legislation but also to put something in place that is appreciated and valued by employees. We also find that employers are keen to have staff meetings about pensions run by nice pensions people.
If you think you need help, you know where we are.