The Challenges of Auto-enrolment for Small Businesses


Alongside real-time PAYE reporting and an increase in the National Living Wage, the introduction of pensions auto-enrolment has put many small businesses under increasing financial pressure.

Under a law introduced in 2012, all employers must eventually offer a workplace pension scheme and automatically enrol eligible workers in it. This requirement has applied to larger employers since October 2012 and will apply to all employers by 2018.

For businesses only employing one person, auto-enrolment has been reported as an unwelcome financial burden, and for the smallest companies without in-house HR departments, it is the business owners themselves who are taking on the responsibility for enrolling their staff into pensions.

National Chairman of the Federation of Small Businesses, John Allan, comments:

“The adjustment for the national living wage and automatic enrolment into pensions considerably increase the cost burdens facing our members. The UK’s small businesses face very different challenges when enrolling their staff into a workplace pension compared with larger businesses, many of whom will have dedicated HR departments.”

Statistics released by workplace pensions provider NOW: Pensions demonstrate that auto-enrolment is proving to be an uphill struggle for many of the estimated 700,000 small businesses due to stage until the end of auto-enrolment in April 2018; in the first quarter of 2017, nearly half (46%) signed up either very close to or after their staging date deadline, whilst a quarter of all firms missed their deadline completely, up from less than one in five in Q3 2016.

With setup fees causing many firms to delay signing up, those who miss their deadline could find themselves issued with a Fixed Penalty Notice from The Pensions Regulator (TPR) which, if left ignored, can escalate into a CCJ. Businesses also need to consider that contribution rates are set to rise. Currently the minimum contribution rates are 1 per cent of salary from the employer, and 1 per cent of salary from the employee (including tax relief). From April 2018 that will rise to 5 per cent in total, with a minimum of 2 per cent coming from the employer. Then from April 2019, it will rise to 8 per cent, with a minimum of 3 per cent coming from the employer.

Nathan Mead-Wellings, of Finura Partners, advises:

“Our message to employers is to plan well ahead, ideally up to six months before their staging date, as this will ensure enough time is given to comply with their auto-enrolment duties as set out by TPR. Auto-enrolment is complicated, so the longer firms allow themselves to tackle it, the more confident and comfortable they’ll feel. Likewise, this should not just be deemed a cost but rather an opportunity if implemented correctly. For instance, an increase in benefits can provide a lift in staff motivation and be a real positive for recruitment.”

In an attempt ease the pressure, TPR has released a new 11-step online guide written specifically for businesses with under fifty employees. It explains how to complete key tasks such as knowing when to be ready, checking who needs to be enrolled and advice on creating a plan of action.

If you would like advice on developing and implementing a personalised workplace pensions scheme, please contact Finura Partners.


The Financial Conduct Authority does not regulate tax and trust advice.


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