On the first of this month, the first “batch” of employers with fewer than 30 employees were required by law to have a workplace pension scheme available to their employees. This new legislation is rolling out over two years, so that by April 2017 all employers, even families employing a nanny or a housekeeper, will have to offer a workplace pension.
This is the final stage of the Auto-Enrollment legislation, which began in 2012. By the end of 2013 all companies employing more than 500 people had to offer a workplace pension to all their employees over 22 years old and under the State Pension age who earned more than £9,440. Although employees are allowed to choose to opt out, the employer is not allowed to encourage (via incentives, for example) or force this choice.
So what does this mean for small and micro businesses? In a nutshell, if your company employs even one person (unless that one employee is yourself) then you must offer a pension scheme. Non compliance can result in fines and even (in very rare cases of continued failure to comply) a prison term. It is predicted that the number of companies enrolling staff onto new pension schemes is going to increase from around 10,000 per quarter to up to 200,000 per quarter, which is going to put a massive strain on the pension providers and, of course, dramatically increase the length of time set-up will take.
Large companies already have the admin and accountancy resources in place to deal with these changes – small companies generally do not. Up to 50% of small businesses don’t understand the implications of this legislation according to the government’s Pensions Regulator. It doesn’t help that there is conflicting information out there: some suggest that it can take up to 12 months to organise a scheme, others that it takes 103 days per company. This is not very helpful if your Staging Date (the date by which you must have all your employees auto-enrolled on a pension, which you can find here) is two months from now.
Fortunately there are some pensions providers who offer a faster set-up service than this, but even so if you are going to be affected by the new legislation it would be best to get in quick. Even if your only employee is temporary, you still need to offer them a workplace pension.
Article written by team member Denise Shaw
Originally posted on 23rd June 2015