Be Sure To Budget For Auto Enrolment

Neil Morrow
Employee Benefits Consultant
The EB Partnership 

Now that the pension reforms are underway, employers are discovering the impact they are going to have on their budgets, and how they will manage these costs.

This is particularly important for small businesses.

A number of factors will affect companies’ costs. For example, the annual staff turnover will be just one factor in calculating the cost of complying with the reforms, because this will dictate the level of administration needed and the amount of record keeping.

Another cost will be determined by the level of support needed to administer the company’s benefits.  As Employee Benefit specialists and Independent Financial Advisers, The EB Partnership are well placed to provide you with the level of support that best meets your needs and budget.

Finally don’t forget the cost of the pension contributions themselves!

Compulsory contributions

As these pension contributions will be compulsory, companies have little time to take the necessary steps to ensure both the finances and administrative support are in place.

According to the review ‘Making Auto-Enrolment work’, published by the Department of Work and Pensions, the Government expects just 15% of employees to opt out once they have been automatically enrolled into a pension scheme.

This means you need to make your employees aware that the pension contributions are of ‘benefit’ to them, and we at The EB Partnership have the solution for you to increase awareness.

We can also show you a way to provide good quality pensions and other benefits for staff, which means you seeing some return on your investment from the cost burden the Legislation has introduced.

Indication of expected costs

  • Administration costs in the first year for all 576,000 employers with two to four staff will be £123 million.
  • Collectively, on-going administration costs will be £47 million a year for employers with two to four staff, with a £16 million total bill for the 192,000 businesses with one employee.

Source: Making auto-enrolment work, Department of Work and Pensions, October 2010

Cost to small organisations

The Federation of Small Businesses (FSB) estimates the administrative costs to small and medium-sized enterprises (SMEs) of auto-enrolling their employees will amount to £2,550 per employer.

Mike Cherry, FSB policy chairman, says: “It is vital that everyone is able to save for their future, but the automatic enrolment scheme is going to cost the smallest businesses dear. The true administrative costs are unknown and could be extortionate.”

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