More SMEs to be affected by auto enrolment
Small and Medium sized Enterprises (SMEs) are warned they are likely to struggle to budget for auto-enrolment.
Recent data from The Pensions Regulator has revealed that approximately half a million more businesses will have to enrol than previously anticipated and will face higher employment bills as they set-up their pensions.
Apparently, around 1.8m small and micro employers will need to meet their pension duties over the next three years, compared to the previous estimate of 1.3m. Under the new regulations, employers must contribute at least one per cent of eligible employees’ qualifying earnings, rising to two per cent in October 2017 and then three per cent a year after that. However, these contributions are not subject to National Insurance (NI) and they can be offset against business profits for tax purposes.
In addition to the employer’s contribution, employee’s will also be required to make contributions which many employee’s see as an extra deduction being made by their employer and it is essential that businesses communicate clearly and at an early stage with their employees to avoid any negative feelings.
But as well as the financial implications this will have for SMEs, businesses could be hit with further costs if they fail to comply with their duties as an employer. If a scheme has not been established by its staging date, the cost could escalate, with fixed penalty fines ranging from £50 to £2,500 a day.
It is important to remember that the contributions must be paid into your scheme at each pay reference date. I would therefore advise SME owners to calculate how much they are likely to have to pay in contributions at each date, and set their budget accordingly.
Receiving professional assistance can help reduce the cost of auto-enrolment for your business by ensuring that you’re compliant and avoid financial penalties.
Should you have any questions regarding Auto Enrolment then please do not hesitate to speak to your usual contact at the office or to Lorraine Wilkinson (Payroll Manager).
Author: Lorraine Wilkinson
Lorraine joined Scott & Wilkinson in 2001 bringing with her over 20 years payroll experience. As payroll manager, she oversees the smooth running of the firms payroll bureau which includes all aspects of day to day payroll. Lorraine is...
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