Thursday, 17 July 2014 09:41
£34,000 auto-enrolment costs could hit smaller firms
Cash-strapped smaller firms could be staring costs of £34,000 in the face if they fail to act quickly and comply with their auto-enrolment responsibilities.
Employers could be forced to backdate pension contributions for all their employees – a possibility reiterated by Pensions Minister Steve Webb at an industry conference last month.
If they fall short in making the deadlines set by the Pensions Regulator, Standard Life has estimated it could cost businesses as much as £34,000 backdate contributions for just 3 months.
The pensions firm has stressed the financial blow that could befall firms, which may already have cash flow constraints.
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The Pensions Regulator also has the power to fine employers with less than 250 employees a maximum of £2,500 per day if they fail to comply with their new duties on time.
Jamie Jenkins, head of workplace strategy at Standard Life, said: "We understand that small and medium sized enterprises are particularly vulnerable to unexpected costs and large administrative burdens and many do not have the same resources to implement auto enrolment as larger employers.
"They may be grappling with significant payroll, benefits, data management and accountancy issues.
"If they don't prepare well before their staging date, they will inevitably encounter problems down the line. All employers need to understand their new pension obligations and the impact auto enrolment will have on their businesses going forward."
London has dominated the SME market with almost 220,000 businesses employing 250 or fewer people, according to ONS figures.
The Federation of Small Businesses estimates that 10.5% of small firms are likely to increase headcounts over the next quarter.
Mr Jenkins said: "More than 3.6 million people have already been automatically enrolled into their company pension by the largest UK firms, with opt out rates low at 10% or less. Smaller firms need to ensure that they are protecting their employees' right to this valuable workplace benefit."
Standard Life compiled the following table of estimated costs of failing to comply based on a range of data.
Employers could be forced to backdate pension contributions for all their employees – a possibility reiterated by Pensions Minister Steve Webb at an industry conference last month.
If they fall short in making the deadlines set by the Pensions Regulator, Standard Life has estimated it could cost businesses as much as £34,000 backdate contributions for just 3 months.
The pensions firm has stressed the financial blow that could befall firms, which may already have cash flow constraints.
{desktop}{/desktop}{mobile}{/mobile}
The Pensions Regulator also has the power to fine employers with less than 250 employees a maximum of £2,500 per day if they fail to comply with their new duties on time.
Jamie Jenkins, head of workplace strategy at Standard Life, said: "We understand that small and medium sized enterprises are particularly vulnerable to unexpected costs and large administrative burdens and many do not have the same resources to implement auto enrolment as larger employers.
"They may be grappling with significant payroll, benefits, data management and accountancy issues.
"If they don't prepare well before their staging date, they will inevitably encounter problems down the line. All employers need to understand their new pension obligations and the impact auto enrolment will have on their businesses going forward."
London has dominated the SME market with almost 220,000 businesses employing 250 or fewer people, according to ONS figures.
The Federation of Small Businesses estimates that 10.5% of small firms are likely to increase headcounts over the next quarter.
Mr Jenkins said: "More than 3.6 million people have already been automatically enrolled into their company pension by the largest UK firms, with opt out rates low at 10% or less. Smaller firms need to ensure that they are protecting their employees' right to this valuable workplace benefit."
Standard Life compiled the following table of estimated costs of failing to comply based on a range of data.
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