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.

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