Member Article

Auto-enrolment already causing confusion for employers

As the introduction of pension auto-enrolment draws ever closer, it has been revealed that the process is set to be a major challenge for many North East employers.

After speaking to more than 200 HR and finance professionals, PwC have discovered that a high percentage viewed the new pensions legislation is the greatest operational challenge facing businesses in the region.

Commenting on the deferred introduction of pensions auto-enrolment, which has been announced by the Government, David Brown, Director at Deloitte Total Reward and Benefits Limited in Yorkshire and the North East said: “The delayed introduction of auto-enrolment for small businesses will be welcomed across Yorkshire and the North East.

“We have been working with businesses for some time to ensure that they are taking the appropriate measures in respect of pensions administration and HR systems and processes to ensure they experience a smooth transition in complying with this new legislation.

John Harding, Northern HR Services Director at PwC said that the biggest challenges would be around proper classification of workers, ensuring communications are issued at the right time, and that the right level of pensions contributions are paid on their behalf.

He commented: “63% of employers mentioned that compliance with pension auto-enrolment requirements was their biggest challenge.

“This will be especially challenging for employers with a high proportion of part-time employees and/or seasonal staff.

“Given that wholesale and retail businesses account for the largest proportion of employment in the North East, this will impact local employers especially hard.”

The survey also showed that a third of employers are ‘uncomfortable’ or ‘very uncomfortable’, with meeting their obligations under auto-enrolment.

Many employers are confused by the definition of pensionable pay, as the ones most commonly used would not meet the requirements of minimum qualifying earnings under pensions auto-enrolment.

Mr Harding continued: “Employers in the North East feel that this is their biggest operational workplace challenge and the biggest change since the introduction of PAYE in 1944.

“Employers should start planning now and be critically assessing the impact these changes will have not only on your payroll and pension arrangements but also what the consequences of this additional cost on their pay budgets will be.

Surprisingly, less than 25% of all larger employers are taking advantage of salary sacrifices which would generate savings which could be used to help manage the cost of auto-enrolment.

He concluded: “Given the challenges that the larger employers are facing in complying with these new regulations, the Chancellor, along with the pensions regulator, payroll and pension providers should be giving thought now as to how to help smaller employers cope with this new requirement.

“We are working with employers, payroll and pension providers as well as the Pension Regulator to find ways to ease the burden on employers.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .