Cash Flow & Forecasting Finance General

The clock is ticking for Auto-enrolment for SMEs

This year the employers’ compulsory pension auto-enrolment scheme is starting to impact on some SMEs.
Employers will have to contribute to a pension scheme for any employee who is aged 22-plus, not already in a scheme and earning more than £8,105 a year. Initially the employer must contribute 1% of the employee’s earnings to a scheme, but this will rise to 3% by October 2018. Employees will also have 0.8% deducted from their salaries rising to 4% by 2018.
Every employer will eventually have to set up a suitable scheme and this will mean not only ensuring that they know their staging date (when they are due to begin payment) but have all the systems in place to meet the deadline.
The Pensions Regulator is advising that businesses need to allow 12 months ahead of their staging date to be sure they have everything ready.
A problem already identified is that the HMRC online PAYE software is not compatible with the online auto-enrolment system.
For those that don’t outsource their payroll management this will include buying and installing payroll software compatible with the pensions automatic enrolment software and identifying a suitable pension provider that is willing to participate.
Those who do outsource will need to check whether your payroll manager is able and willing to manage the auto-enrolment set-up and administration for you.
It is also becoming clear that many accountants, payroll management companies and pension providers are either unable or unwilling to take on the task for a very small workforce on the grounds that it is not cost-effective for them.
In that case SMEs as employers will have no option other than to manage the process themselves using the guidance to be found on the Pensions Regulator website, and this will be a challenge when trying to run a business, not to mention the significant increase in costs to business payrolls.
Make sure you know your staging date and allow plenty of time for planning.

Finance General Rescue, Restructuring & Recovery Turnaround

The forgotten squeeze on incomes

We hear a lot from the unions about a squeeze on incomes for the blue collar workers they represent but there is another, large group of people who have suffered a much bigger drop in income.
Many middle management positions have gone altogether since the 2008 Great Recession began and older people, especially, who were made redundant from these positions have found it difficult to find other jobs.
According to research by the Resolution Foundation the loss of these middle management posts has contributed to a fall in real wages.
Many of these former managers have turned to self employment, setting up as consultants or outsourcing their skills to companies as needed and this has led to an estimated 20% reduction in their income although I believe the reduction is much greater.
The consequences of this are still to come.  While initially many have been cushioned by redundancy pay, reclaims from their bank due to mis-sold income protection and other insurance products, and low interest rates sooner or later the money will run out.
Having lost out on their occupational pensions, how many of these newly self employed are able to put money aside for their pensions?   How many will be able to repay their mortgages, let alone service them when interest rates rise?
Eventually we will face a serious Welfare payments crisis as more people reach retirement age without adequate provisions, not to mention that there will need to be a substantial correction to house prices, which are over-valued by up to 30% in our view.