It has been widely reported over recent months that the first quarter of 2017 saw a significant increase in the number of businesses that either missed their Auto Enrolment (AE) staging date or only started the process within a short period prior to it. Aviva and Now Pensions have both published statistics that show around one in five businesses not being adequately prepared to meet their obligations.
The trend is backed up by statistics published by The Pensions Regulator that show a sharp increase in the number of Compliance Notices (6296 in last Quarter 2016) and fixed penalty notices (919 in the same period) issued. At the same time, they have announced a toughening stance on enforcement to tackle the issue.
It seems, therefore, that despite significant publicity around the changes and implications of non-compliance over many years the message just isn’t getting through.
So what are the reasons behind the numbers? And how can the 700,000 small firms that are still to stage prior to April 2018 ensure they don’t join the statistics?
Why the apathy?
The most obvious reason for the apparent inaction is that smaller businesses don’t have a dedicated HR or Payroll function as larger companies do. The responsibility for compliance therefore falls on the business owner or member of the management team who doesn’t have the time or isn’t equipped to know where to start. So it ends up being left on a to-do list until the last minute or, worse, missed altogether.
Another common cause is a general misunderstanding around whether the legislation relates to their business or not. Owner-managed businesses with only one or two directors as employees can often be unsure about whether they need to take action, whereas those without any current eligible employees can often not realise that they still need to put a scheme in place and continually assess their staff in case their position changes.
Finally, confusion around the various roles and responsibilities within the process can leave some businesses mistakenly believing that their payroll software or outsourced payroll provider will take care of a wider range of activities than is actually the case. They therefore miss specific activities or deadlines that were their responsibility in the belief that they are being dealt with elsewhere on their behalf.
Regardless of whether action isn’t taken though lack of time, burying their head in the sand or a general misunderstanding of the process, the penalties for non-compliance can be great.
Three things to do now
- Understand the timings. While this seems obvious it is surprising how many businesses are not aware either of their staging date or the amount of time it can take to arrange everything. We recommend starting the process at least three months in advance.
- Be clear on roles and responsibilities. Understanding their specific responsibilities and the process that needs to be followed is key. Also, be clear about how much support your payroll software will provide – it varies considerably between providers.
- Speak to a professional. Whether it be an accountant, outsourced payroll provider (if using one) or financial advisor, the sooner you look for advice and support the less likely you are to miss a crucial deadline or stage in the process.
The likelihood is that, whether you as an accountant manage your clients’ payroll or not, you will have been speaking to them about Auto Enrolment for many years at this stage. It is important that you don’t stop now. If anything, with tougher enforcement being introduced for non-compliance you need to increase the communication you have with them, to make sure they take appropriate action.
If you manage your clients’ payroll then make sure you have processes in place to handle short timeframes as well as the additional ongoing administration it brings. Take the time to review your payroll software; AE Management functionality and process automation are the key to ensuring you can provide efficient and accurate support across multiple clients.
One area that many businesses need additional support with is the selection of a suitable pension scheme. Using platforms such as Pensions.Market are an easy way for your clients to select the right provider.
Finally, have you considered outsourcing as an option? Moving your client payrolls to a specialist bureau such as Qtac can enable you to provide clients with all of the support they need without the hassle or increased cost to you.
- Simon Palmer is Sales and Marketing Director at Qtac Payroll, providers of AE compliant payroll software
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