Auto Enrolment – ignoring it will cost you ￡’s
Paul Pritchard
Director at Abacus Accountancy specialising in Taxation and Accounting. If you are a self employed or run a Limited Company I can help you run your business more efficiently and pay less tax. Contact me for more info.
As a small business owner (typically a business employing less than 50 staff), you will have sought all manner of auto enrolment advice, but have you considered the actual costs involved and most importantly have you carried out a review of your company budget to accommodate these costs.
For the first few years of auto enrolment, when contribution levels are lower it will not result in any additional tax liabilities for firms, as employer contributions can be offset against corporation tax and are not subject to employers National Insurance contributions. But employers need to assess how much they can expect their costs to rise with auto enrolment, whether that can be accommodated within existing budgets and, if not, where savings can be made to ensure the firm begins enrolling on time.
Firstly, what are the calculations for working out the costs per employee in terms of contributions, from yourself, the Government and the employee. The regulations dictate a minimum percentage of ‘qualifying earnings’ must be paid into a workplace pension scheme. Are you with us so far? “Clear as mud”, we’re sure you will agree!!
As well as the mandatory contributions, what are the additional costs involved in implementing and administering an Auto Enrolment Pension? Well firstly there are the costs of your time familiarising yourself with the process, sourcing a pension provider, then there are the administration costs, issuing the necessary notifications, following up on the resulting paperwork, the costs of software or outsourced administration costs (eg accountant or payroll bureau) to enable your company to comply month to month with the the assessment of workers details, ensuring these are up to date and the mandatory communications.
Finally, add to this the potential fines that can be levied by the Pension Regulator for inaction, failure to comply or encouraging employees not to join the scheme (many business owners are under the misconception that if their employees “opt out” then they, as employers are exempt from the process – this could not be further from the truth), then this could become a very expensive process if not approached properly. Misunderstanding the process, offering the wrong or poorly phrased advice to an employee and ultimately ignoring Auto Enrolment Pensions can be potentially lethal to your business.
If you need any help with your Auto enrolment journey, please do contact us – we’re always happy to help. Call 01376 34 35 35 or e-mail [email protected]