Many large businesses have successfully automatically enrolled their staff into pensions during the past year, but new figures reveal small and medium size businesses could find the going far harder in 2014.
Research from the Chartered Institute of Personnel and Development (CIPD), shows that many small and medium sized businesses, who will have to comply with the new rules next year, could struggle. The main concerns seem to be over the cost of compliance, as well as the contributions themselves:
- 26% of firms believe they will need to reign in pay rises to help meet the cost
- 22% anticipate they will need to freeze pay
- 23% believe there will be a knock on effect on bonuses and overtime
The findings of the CIPD research are in contrast to those for larger businesses, where only 9% of employers have sought to offset the costs of Automatic Enrolment by cutting pay growth, overtime or bonuses.
Low opt out rates
Automatic Enrolment was launched in 2012, with the largest employers enrolling their staff into workplace pensions, to which both the employee and employer must contribute.
Whilst employees can opt out, the low starting level of contributions, coupled with a desire to plan for retirement, has meant that the numbers leaving their new workplace pension have been relatively low, at less than 10%.
Time to plan
Whilst the initial reaction of many employers, might be to leave planning until much closer to their Staging Date (the date by which they need to comply), those who leave longer to plan will undoubtedly find the going easier.
Research from the Centre for Economic Business Research (CEBR) has already found it will take employers who go it alone and don’t take advice, 103 days to comply with the initial regulations.
Charles Cotton, CIPD Performance and Reward Adviser, commented: “While large companies tend to have long established traditions of paying in to employee pensions, for many SMEs this is their first foray into the world of pensions. They are unlikely to have access to the same levels of expertise or support networks as their larger counterparts and, as our survey reveals, manyfear that it could be a costly exercise for their business.”
Charles Cotton again: “However, with early planning and preparation SMEs can overcome any challenges and realise the opportunity that auto-enrolment offers. With some 30,000 employers due to go through the auto-enrolment process between April and July 2014, demand for professional advice and guidance from pension advisers and providers is going to be high. We would therefore urge SMEs to act now to guarantee access to the best advice, to negotiate the best rates and secure the most appropriate pension scheme for their business.”