Getting your processes right
Andy Parker, principal DC and financial wellness at Mercer, says SMEs must first realise that auto-enrolment is more about “processes than pensions”.
“Will your existing payroll systems be able to cope with the changes?” he asks. “You have to know exactly what action you have to take with every employee. Some will need a letter stating they are in the new pension plan while others will be told that while they are too young they can still join if they want to. You must communicate all options such as how they can opt-out in the future as well. Your payroll system must be able to do this and be able to cope with regularly making these changes as new members join or leave.”
He says it is also key that payroll providers – if a company chooses to outsource this function – and pension scheme providers must be flexible and able to adapt to these changes. “Who does what and when? Can a payroll provider plan in advance new employees joining a company in the middle of a month and paying a part-month deduction?” he asks. “If you are using a third party ensure they can do what you need when you need it.”
In fact, in a recent Mercer/CBI survey it was found that businesses saw on-going compliance and upgrading their payroll systems as their top challenge on auto-enrolment.
Kirsten Bach-Petersen, senior consultant at Premier Benefit Solutions, believes six months before a staging date is an opportune period of time for a company to plan the systems and providers it will need. However, stark challenges lie ahead.
“There is not a huge appetite out there for SMEs among pension providers,” she warns. “It’s purely financial. With the lower amount of employees and the minimum deductions these are not attractive sums of money to a big provider. The Government’s NEST scheme will be more likely providers for SMEs yet to stage.”
She says understanding exactly who is eligible for enrolment in a company and communicating the changes to all employees is vital.
“Who are you responsible for? Does it include self-employed workers? Be clear on the legislation,” she states. “It is often hard to engage staff on issues such as pensions but you have to inform them and ensure they understand their duties. There are statutory letters you have to communicate with staff but in an SME you could do a bit more than these requirements. Perhaps get five minutes with everyone in a room together, put a note on their payslips or send them email reminders about the changes. You have to be careful to just state facts because you can’t be seen to be giving pensions advice to staff. But you can make your communications much more user-friendly.”
And not a blue and purple monster in sight.