Half of small businesses are struggling with pension rules
The research by the Federation for Small Businesses (FSB) has found that nearly half of SMEs do not completely understand how to implement workplace pension schemes while 76% said auto-enrolment will place “too much” pressure on their businesses.
Over the next two years more than a million small and micro businesses will need to set up a workplace pension for their employees under the Government’s automatic enrolment rules. January sees the number of employers reaching their designated staging date – the date on which they need to start complying with auto-enrolment – rapidly ramp up with tens of thousands ‘staging’ each month in 2016 and 2017.
Jonathan Russell, partner at UK200Group member firm ReesRussell, said:
Auto-enrolment is a huge problem for many small businesses, not simply because many small businesses do not have the time, skills or finance available So far, it has generally been larger business which have had staging dates and with larger businesses not only do we have more internal resource but frequently more structured payrolls. Smaller businesses often have very varied ways within the same business of paying people; a problem which was never recognised even with Real Time Information (RTI) and even now some businesses have problems with that.
In addition, the Pensions Regulator is getting questions to which it does not have answers – for instance, when it comes to directors, there is no clear ruling as to what constitutes a contract of employment. There are already questions being asked and I’m sure the litigation band wagon will follow quickly behind, as to whether small employers who just opt for NEST or similar provision, are failing in their potential duty to ensure their employees are offered the most appropriate pension scheme.
Auto-enrolment is seen by many as a government complexity to opt out of their pension responsibility and at the same time creating a cumbersome and expensive responsibility on employers. Many feel there was already a mechanism in place for collection of money, called National Insurance and it would have taken little for Government to ring fence additional contributions, which is what it failed to do back in 1946.
