SMEs not prepared for auto enrolment – Irwin Mitchell survey

A SURVEY examining the readiness of SMEs in the West Midlands for auto enrolment pension rules has revealed that with less than a year to go, many are at risk of facing significant fines for non-compliance.

According to the report, which questioned 257 organisations, many businesses in the region revealed that they had not yet fully considered some of the key issues that need resolving ahead of implementation of the new rules.

The study by law firm Irwin Mitchell found that almost 60% of firms had not budgeted for the additional costs that can be incurred as a result of auto enrolment, whilst nearly 30% said that their payroll system was not compliant.

Six out of ten businesses said that they had not checked the pensions provisions contained within their staff contracts and assessed how they affected plans for auto-enrolment.

Fergal Dowling, employment partner at the Birmingham office of Irwin Mitchell, said: “There are some uncomfortable findings in this report. Although 80% of SMEs say that they have started their auto-enrolment preparations, on closer inspection it appears many are not ready in some crucial areas. 

“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.”

Launched in October 2012, auto enrolment is considered to be the most significant shake-up of occupational pension schemes in more than 60 years.  It makes it necessary for all UK employers to place all ’eligible job holders’ into a qualifying pension arrangement. All employers are obliged to contribute to that pension arrangement and monitor their workforce and keep records of their workforce’s membership of the scheme. 

The new laws came into effect for the UK’s largest businesses last year and, during this summer, organisations employing between around 4,000 and 2,000 will need to comply.

From April 2014, businesses with between 250 and 160 employees will need to be ready. Firms with fewer staff members will be required to comply with the rules by a particular ‘staging date’ according to their size up until 2018.