Why are so many businesses missing their staging date?
There’s been much talk in the press about the number of companies seemingly procrastinating over their auto-enrolment staging deadline. The statistics around this vary from between 20% and 40% of companies that either leave staging to within a month of the deadline or miss the deadline altogether.
It seems easy to want to berate these businesses and there are often some painful consequences that the businesses themselves face from the Pensions Regulator. Whilst we wouldn’t criticise this, as ultimately it’s the employee who loses out, we do empathise somewhat.
In our conversations with clients that appear to have, let’s say, a more ‘relaxed’ attitude to auto-enrolment, there are often genuinely valid reasons behind their actions. Let’s face it, the pensions world has undergone several guises, scandals and reforms over the last 20 years or so and smaller employers should be forgiven for at least a modicum of confusion. whilst it’s interesting to look at the statistics around this issue, it’s equally important to look at the most common reasons behind the shortfalls and what businesses can do should they miss their staging date.
- Money, money, money…
Many small businesses trying to compete in a market against larger players already have a heavy cost burden with relatively small profit margins and auto-enrolment is seen as just another cost to their business.
Opt Myth Buster: What many businesses don’t realise is setting up an auto-enrolment scheme isn’t always expensive. For as little as £145 and £15 pm* companies, like ourselves, will set up and manage your auto-enrolment capability regardless of the number of employees to be registered.
- Who? Me?
Yes, you. It’s understandable that some small businesses employing a handful of staff do not feel as though they have to offer AE. Indeed, under the old stakeholder pension regulation, this only applied to businesses employing 5 members of staff or more but the new AE legislation takes a very different tack. If you already have a pension scheme up and running, you will still have to ensure it meets the new AE rules.
Put simply, an eligible employee is one aged between 22 and State Pension Age and earning over £10,000 a year. And staff who fall outside of these age and earnings criteria have a right to opt into a pension scheme if they want to.
Opt Myth Buster: As long as your company has 1 eligible employee or more, implementing an AE scheme is NOT optional. The only caveat is if you are sole director with no employees.
- Tomorrow’s another day…
We’ve helped many companies that have simply put their auto-enrolment obligations off having been weighed down with day-to-day business activity. Employers can postpone the implementation of an AE scheme for up to 3 months but they are legally required to notify eligible employees within 6 weeks of the original staging date. If they fail to do so, the regulator might impose a fine.
Opt Myth Buster: Whilst you can postpone contributions into the scheme for up to 3 months, you MUST still have a scheme in place at your staging date – this isn’t negotiable. Don’t think that your company is too small for the regulator to care. Failure of the intention to postpone contributions without informing eligible employees could not only lead to a hefty fine but you’ll have to backdate not just YOUR contributions, but THEIRS too.
- I don’t know if my employees want one…
Although this could well be the case, you are still legally required to offer an AE scheme and setting one up is NOT optional if you have employees – even if they eventually all choose to opt out. The caveat here is that employees need to have access to a scheme.
Opt Myth Buster: It is common and, arguably, logical that a company which finds its staff don’t want or intend to simply opt out of an auto enrolment scheme feels its obligations end there. Unfortunately, this isn’t the case and the regulator can issue large fines to firms not fulfilling their obligations.
If any companies identify with any of these scenarios and, more importantly, find that they have missed their staging date and have missed the 6-week period required to invoke postponement, help is at hand!
- Get in touch with the Pensions Regulator immediately – the quicker you get in touch (and depending on your situation) the better positioned you will be to avoid a fine.
- Register with an AE provider – Be aware that not all pension providers allow you to set up a pension scheme if your staging date has already passed – we do!
- Assess your employees and communicate with them – Any eligible employees need to be enrolled – we are here to help with that too.
- Backdate any missed contributions – In order to become compliant, you will need to backdate contributions for all employees who are eligible or who have opted in.
- Complete your declaration of compliance – your scheme provider can help with this but it’s important in order for you to become fully compliant.
* fees can vary depending on the number of employees to be registered and the initial set-up fee chosen.
Richard Tailby is a Regional Development Manager for Opt Pensions and covers the South, West and Mid Wales regions, he can be contacted on 07714 8541259 or Richard.firstname.lastname@example.org