Member Article

UK Micro-businesses Unprepared for Auto-enrolment

New research shows staff are set to take the financial hit as owners underestimate the costs of implementing the pension legislation

Micro-businesses* across the UK are unprepared for the impact Auto-enrolment** will have on their business, new research from Intuit QuickBooks, the world’s number one online accounting software has found. Auto-enrolment costs are estimated to be £8,900 per small business, yet 40% of the UK’s smallest and most vulnerable businesses either don’t know or don’t think it will cost anything to set up, while a further 11% think it will only cost up to £5,000. Added to this, it takes an average of 103 days to implement per SME, yet shockingly, 85% of those polled think it will take 50 or less.

The pension legislation is on the horizon for all micro-business – which account for 96% of all firms in the UK and it seems employees will take the financial hit if owners experience significant Auto-enrolment costs. 34 per cent of micro-business owners will offset any financial implication from implementing Auto-enrolment and the increased contribution into staff pension pots by capping staff salaries and/or bonuses. 19 per cent also claim they will have to reduce employee benefits and entertainment as a result. Only 37% of businesses will take on the costs by using business working capital.

This financial and administrative strain caused by Auto-enrolment is also set to force some micro-businesses to consider illegal noncompliance. The research revealed that 56% would be tempted to encourage staff to opt out of the scheme if they were unlikely to be found out by The Pension Regulator. And 68% would be prepared to miss their staging date, despite the £400 starting fine in place for doing so.

Rich Preece, UK VP and Managing Director, Intuit said: “Given Auto-enrolment will affect almost every person across the UK in some way, we were surprised to see how many micro-businesses are still unprepared for the legislation. It is worrisome that these vulnerable businesses may not be taking the necessary steps to ensure their business will not only comply with their initial staging date, but be set up for the on-going impact that workplace pensions will have on their business. It’s important they act now to educate themselves on the issue and put systems in place to manage the tasks ahead.”

The research also revealed very limited knowledge of Auto-enrolment amongst micro-business owners. Only 33% claimed to be able to accurately describe the legislation and 65% admitted to not knowing their businesses’ staging date. As a result, this prompted 68% to suggest they would be likely to outsource all the processes involved with Auto-enrolment to an accountant.

*Micro-businesses - Employ between 1-10 people

**Auto-enrolment - The law on workplace pensions has changed. Every employer with at least one member of staff now has new duties, including enrolling those who are eligible into a workplace pension scheme and contributing towards it.

This was posted in Bdaily's Members' News section by Rich Preece .