The Federation of Small Businesses has released the results of a survey which show that nearly half of employers are unclear about the auto-enrolment process.
Since 2012, 5.4 million workers have been enrolled on a workplace pension scheme. Pensions are offered to anyone over the age of 22, earning more than £10,000 a year. Now that it is a legal requirement for employers to have a workplace pension scheme, more than one million businesses will need to enrol their employees. A quarter of employers have expressed concerns that they would feel the financial strain of additional costs.
Despite the efforts of the Pensions Regulator to raise awareness, small businesses are still not certain about the rules. The Federation of Small Businesses has welcomed the increase of information from the Pensions Regulator, who encourages businesses to act sooner rather than later. They want employers to pay attention to their rights and ensure they are being given the appropriate pension provision and contributions.
A possible reason that small businesses have been putting off enrolling is because of the costs to the business. The two cheapest providers charge £36 and £500 a month to provide all auto-enrolment services. The only free option is the National Employment Savings Trust, the state-run workplace pension.
For many small businesses with a small number of employees, a £500 charge to set up a pension scheme is unwelcome; particularly if an employee does not earn enough to pay in. NEST does not charge small businesses fees for setting up a pension but the offerings are likely to be limited, it also does not allow customers to transfer other pension pots in or move money out.
Larger companies however might be able to set-up a fee or even £2,000 for a decent scheme. 2 million workers are currently signed up to NEST. Auto-enrolment has been hailed a success by the government although the vast majority of UK small enterprises have yet to complete the process, despite it now being a legal requirement.
Atop of the pension changes is the introduction of the National Living Wage, which will require employers to increase the pay rate for all employees receiving minimum wage. Small businesses are unlikely to be pension experts and require clear advice to ensure they make the right decisions for their business and comply with the regulations. It is therefore little surprise that only 36% of SMEs reported they expected to growth in the first quarter of 2016.