A significant number of SMEs have failed to deal with the important issues that must be resolved before their pension auto-enrolment staging date arrives, and risk facing stinging fines as a consequence.
This is the sobering finding of a study from law firm Irwin Mitchell, which polled 250 small UK employers. 40% admitted that their payroll systems were not yet compliant, while 60% revealed that they had not taken into account the increased costs of the scheme. The same proportion had not yet checked how auto-enrolment would affect existing pension provisions in current staff contracts.
The head of Irwin Mitchell’s Employment and Pensions group, Tom Flanagan, said: “There are many pitfalls to watch out for, including changes to employment contracts and pension scheme rules, restructuring employee benefits along with reviewing and replacing HR and payroll systems. Choosing the wrong option could involve committing time and resources in the wrong areas, or with an unsuitable solution.”
He went on to warn the SMEs that are currently failing to comply with auto-enrolment compliance that they face eye-watering fines from the Pensions Regulator, which can be as high as £10,000 a day.
Firms employing between 2,000 and 4,000 people, including Umbrella Companies, will need to comply this summer. Smaller firms employing between 160 and 250 staff will need to comply by April 2014.
Mr Flanagan went on to say that “a more streamlined and cost-effective tool” was needed to help SMEs to handle the transition. Employers are currently required by government to pay for external consultants and advisors themselves, and are not permitted to pass the costs on to the scheme or their employees, he said.