Auto-enrolment: An Opportunity or a Threat?

November 10th 2023 | Posted by phil scott

In 2016, we are in the full swing of pensions auto-enrolment.  Starting in October 2012, with the process due for completion in 2018, auto-enrolment is now reaching the top of the agenda for many businesses.

It is especially significant for small & medium enterprises and owner-managed businesses that could be new to the pensions arena and may have a steep learning curve when it comes to implementing the programme.

So, what is auto-enrolment?

Auto-enrolment is a government scheme created to ensure all eligible workers are enrolled in a workplace pension.  The aim is to support people to save for their future and improve their standard of living in retirement years.  The programme will see up to 11 million workers enrolled in a scheme.

Eligible employees must be at least 22 years old and earn a minimum of £833.33 per month.

How auto-enrolment affects employers

Auto-enrolment is not an automatic process for the employer.  Businesses will have to work hard to make sure they implement the scheme and follow compliance.

It may sound simple, but employers will need to ensure they choose an appropriate pension scheme, enrol their staff correctly, communicate all the necessary legal information on time and keep on top of changes to their staff, overtime, new starters, salary changes and more.

It’s a big responsibility and employers not only need to complete a declaration of compliance 5 months after their start date, but they will need to update this every 3 years.

And employers who don’t complete auto-enrolment appropriately can be subject to fines.

Impact on accountants – it’s all in the perspective!

Bearing in mind SMEs and owner-managed businesses are likely to look for some outside assistance, where will they go?  Who is their first port of call?  This is most likely their accountant who does their payroll.

1. Review your clients’ staging dates (start date) and liaise with them sufficiently in advance
2. Fine tune what auto-enrolment support services you can offer your clients
3. Explore the systems available to you – additional enhancements to your current payroll software, new software or a bespoke system for clients
4. Work with an Independent Financial Advisor if needed
5. Communicate to your clients what you can do for them and the services you are offering
6. Help your clients understand their auto-enrolment responsibilities as an employer
7. Work hand in hand with each client to ensure you are working together to achieve their objectives and obligations
8. Be as automated as possible in your systems
9. Demonstrate to your clients the additional value you are giving them and reflect this in your fees

While auto-enrolment is about pensions for employees, the administrative impact is all about the payroll system.  They go hand in hand – payroll must administer the scheme and, as a result, it is those accountancy firms that offer payroll services who will find themselves having many an auto-enrolment discussion!

Like any new scheme, auto-enrolment may seem overwhelming at first.  As payroll software struggles to keep up with requirements and employers struggle to understand the implications of their responsibilities, some accountancy firms might feel that getting involved in auto-enrolment is simply a headache they would prefer to avoid.

But what are the results?  With pensions & payroll so tightly intertwined, accountants that chose not to support clients with pensions auto-enrolment could find themselves losing business.  Businesses will be looking for a smooth and efficient solution and with many options of payroll services available, could quite easily choose to take their business elsewhere.

Perhaps the solution for accountants is not to look at the negative impact on their time and resources, but to view these changes as an opportunity and a chance to forge better client relationships, offer a wider range of services and demonstrate their critical value (all of which can lead to an increase in fees).

Tips for navigating auto-enrolment as an accountant – and even enjoying the opportunity!