Elliott Silk, head of employee benefits at financial services company Sanlam UK, told HR magazine that SMEs need to ensure they carefully prepare for auto-enrolment or risk a hefty fine, but the upcoming election is causing some uncertainty among employers.
This year, 50,000 companies are due to auto-enrol their employees and in 2016, a further 500,000 must do so.
“The number of companies staging in the latter half of this year after the general election is far higher than at the start of 2015, so early preparation is crucial,” said Silk.
SMEs will face a fixed penalty of £400 if they fail to comply with the legislation, with the potential of incurring additional escalating fines.
In the last three months of 2014, 166 businesses were fined for non-compliance, according to figures from the Pensions Regulator. The trend suggests the smaller a company is, the more likely it will fail to comply.
Silk said employers need to factor advice into their plans. He said: “As well as the physical costs, companies also need to take into account the time it will take to integrate an employee benefits specialist into the workplace. Frequently, employers end up taking on all the liability themselves. We could potentially see employees taking action against employers if, for example, the default investment fund selected is inappropriate and workers lose money.”
He added that auto-enrolment is still “a great benefit” for SMEs, despite administrative challenges. “Compliance with auto-enrolment is a given, and this game-changing legislation may enhance relationships between employer and employee, as staff feel they are receiving a financial benefit that will support their future,” he said.
