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Why you need to prepare for auto-enrolment

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New legislation has been introduced that means that employers have to enrol workers into a pension scheme if they fulfil specific criteria.

If a worker is aged between 22 and the age when they would receive the State Pension, earns above £10,000 per annum, and works in the UK, they must be enrolled into a pension scheme. Businesses with fewer than 30 employees must have enrolled them into a pension scheme by 2017.

Reasons to prepare for enrolment

Auto-enrolment may seem to be a routine administration task, but it can be a time-consuming process. Some experts believe that it can take around six months to put procedures in place for auto-enrolment.

Not complying with the new legislation will mean that you face penalties from the authorities too. According to a recent study, small businesses in the UK could be facing a bill of £317bn, so it is crucial to get it right the first time. Although the Pensions Regulator has reported that an employer with few employees won’t face any set up costs, the cost of your time soon adds up. Outsourcing finance and accounting is a cost-effective solution for many small companies.

The cost of auto-enrolment

Although you may face minimal costs to implement the new auto-enrolment scheme, the cost of recruiting will be more than previously. For each employee who fulfils the criteria, a business will have to contribute 1% of their gross salary during 2016, which will increase to 3% in 2018. Staff are also required to contribute to the pension. As this will increase the cost of recruiting staff, there may be options that you will want to consider. For instance, as the legislation only applies to those with earnings above £10,000, do you really need a full time employee, or could you employ someone on a part-time basis? Other options like hiring freelancers may also be possible, and would reduce recruitment costs for a company. Deciding how you will manage your recruitment strategy can be a time consuming process, so implementing the legislation in a timely manner is crucial.

How to be ready for auto-enrolment

Make sure that you know what your staging date is, by checking with the website of the PensionsRegulator. Consult with a professional before selecting a provider, so that you can be sure that you remain compliant.

If you would like to know more about auto-enrolment and how to prepare, contact us for an informal chat.