Bivek Sharma, head of small business accounting at KPMG, takes a look at the ins and outs of the new auto-enrolment system and advises on how you can best prepare your business for the change.
Auto-enrolment is sweeping the nation. By summer 2017, every employer will need to have arranged and be contributing towards a workplace pension scheme - and to register their arrangements with the Pensions Regulator.
With one in seven retirees leaving work without any form of personal pension, the initiative - in principle - undoubtedly shows proactivity on behalf of the Government. But with such a monumental change to our pensions system now fast approaching, the big question is: has enough been done to prepare small businesses for the big switch?
[strong]Unprepared for auto-enrolment[/strong]
Start your planning now. The deadline for businesses with 30 to 39 members to comply with AE (1 October 2015) is now just weeks away, while for businesses with fewer than 30 members of staff, staging is staggered over years from June 2015, depending on the last two characters in their PAYE reference number.
[strong]Do I have to register for AE?[/strong]
It might seem tempting, especially for microbusinesses with only a handful of employees, to simply ignore the auto-enrolment deadlines - but do this at your peril. Non-compliance by an employer with a PAYE scheme of between five and 49 people could risk fines of up to £500 a day. So far, the Pensions Regulator has confirmed that it has fined around 600 employers for non-compliance.
[strong]Yes, that means you too![/strong]
The Government requires even the smallest of businesses to eventually sign up. So if you hire a nanny or a small team of part-time staff, you will need to enrol.
You'll need to offer AE to any workers over the age of 22, under the state pension age and who earn more than £9,440 a year (a threshold that may rise between now and when small businesses reach their start date). These workers must be enrolled if they are not already part of a qualifying workplace pension scheme.
[strong]How can I get everything sorted in time?[/strong]
Businesses have an ongoing responsibility to stay compliant, adding and removing joiners and leavers, as well as assessing employees as their rates of pay change and dealing with opt-outs, which poses a significant challenge in itself.
Fortunately, registering with a pensions provider and completing the above tasks will keep you compliant, legal and, most importantly, provide your staff with secure savings for retirement.
However, this will undoubtedly require time and resources, so it would be sensible for those with no experience of running workplace pension schemes to seek the help from a financial adviser for guidance on the auto-enrolment process - as soon as possible.