Action plan required for your employer duties

1 May 2012
Winston Churchill once said "Let our advance worrying become advance thinking and planning". The same can be said about the snappily-titled "auto enrolment employer duties" that were brought into force from October 2012.

Unfortunately, the likelihood is that all employers will face additional cost and administration burdens as a result of auto enrolment and the employer duties. Here are four basic steps to help you plan and prepare.

Find out when your staging date is

This will give you your deadline for implementation and a point to work back from. Your staging date will be based on the number of people in your largest Pay As You Earn (PAYE) scheme as at 1 April 2012.

The dates are spread over five and a half years between October 2012 and February 2018. Larger employers will go first, smaller employers last. View our summary table to find out your staging date.

Find out the duties that are likely to apply

Every employer in the UK will have some duties to perform but exactly what you'll need to do will depend on the types of worker you employ.

As a rule of thumb, any worker over age 22 and under State pension age, and who earns more than £10,000 a year, will be treated as an 'eligible jobholder'. You'll need to automatically enrol these workers into a suitable pension scheme and as long as these workers stay in the pension scheme, make contributions on their behalf.

You'll also have to provide a pension scheme for workers who don't fall into this category and in some cases you'll also have to contribute.

Review pension provision

Even if you already offer some form of pension provision, you'll need to make sure that the existing scheme meets a minimum standard. This generally means that there must be a minimum contribution rate, made up of both employer and employee contributions. If the scheme isn't up to scratch, contributions will have to increase.

Building up these contributions to the minimum standard slowly might be preferable to waiting until the last minute and facing a high up-front bill. If you don't have a pension scheme, you'll have to set one up sooner or later. Again, starting to do this as early as possible will allow you to build the scheme up at your own pace.

Consider the impact on your business

There is no doubt that auto enrolment will have cost implications for every employer, large or small.

You'll need to consider how you'll meet these costs.

  • Can you simply absorb the costs, potentially reducing profits?
  • Will the costs of your goods or services need to increase?
  • Will staff remuneration structures have to change?
  • Will HR processes and systems need to change?
  • Will business plans need to be adjusted to reflect the increase in costs?

These are just some of the questions that you'll need to address. Planning ahead, well before your staging date, could help smooth any cost increases, avoiding last minute shocks.

What's clear is that you'll face a major challenge when your employer duties start. With the economic climate as it is, it's probably even more important to plan as early as possible. It won't be easy.

But perhaps Mr Churchill can again offer some wise words: "If you're going through hell, keep going!"

About the author

Jamie Clark

Business Development Manager

A self-confessed 'Pensions Geek', Jamie reads Pensions Acts for breakfast. He's spent the last two years working on auto enrolment and has talked to hundreds of advisers and employers about how they can best prepare.

The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England and Wales number 99064. Registered office: 55 Gracechurch Street, London EC3V 0RL.