22:48
Faizan
According to estimates from the Centre for Economics and Business Research (CEBR), average set up costs for businesses with less than 100 employees will be approximately £12,600 and businesses with only one to four employees could still expect to pay a whopping £8,900.
Employers will also have to pay contributions of 1% of their employees' qualifying earnings rising to 3% by October 2018. On top of all this, there's all the extra administration time, with reports of up to 33 individual administration tasks required to deliver each scheme.
The following five tips will help employers to significantly reduce the costs of delivering Auto Enrolment.
1. Choose the Right Scheme
There can be a significant difference in charges between the various pension providers and their schemes. Charges impact the employer and employee on an ongoing basis, therefore, it's extremely important not only to select a provider and scheme that offers the right features, but also one which offers the best value. A significant number of providers have dramatically reduced their charges in recent years so it makes sense for every employer to search the market and investigate all of the alternatives, even if they already have a scheme in place.
2. Careful Interpretation and Use of the Rules
There are a number of ways to set up an Auto Enrolment scheme and a wide variety of options in the rules which, if used correctly, can significantly reduce both initial and ongoing costs. For example, selecting the right contribution rate for each individual employee can have a significant impact on the monthly cost for both the employer and the employee. There are a whole host of other options available so it really pays to take the time to fully understand the rules and consider all of the available options before setting up the pension. Once set up it is not possible to change the contribution structure, therefore, it is important to get it right first time.
3. Tactical Opt Outs
Auto Enrolment may not be the best solution for all employees. In fact, it may be beneficial for some employees to opt out of Auto Enrolment altogether. Whether opting out is the right course of action will depend on the individual circumstances of each employee, but where it's appropriate to do so, significant cost savings can be enjoyed by both the employer and the employee.
It's important to note that Auto Enrolment rules prohibit employers from providing advice on opt outs. Therefore, if an employer does want to investigate this option, it's imperative to seek support from a qualified pensions specialist with experience in Auto Enrolment opt outs.
4. Salary Exchange
Another way to reduce costs that can benefit both the employer and employee is to offer a salary exchange arrangement. Salary exchange allows both the employer and employee to make significant savings through reduced national insurance contributions. Salary exchange can be great for most employees, however, there are certain circumstances which mean that it's not suitable for everyone. This has led HMRC to insist that if employers want to offer salary exchange as an option they should provide employees with access to advice.
5. Use an Auto Enrolment Specialist
Employers are highly unlikely to have the in-house skills required to ensure seamless delivery of auto enrolment in the most cost effective way. Using an outsourcer is the best way for employers to ensure that they are benefiting from all cost savings available to them. However, Auto Enrolment is a complex process to manage and in order to benefit from all of the cost savings available, great care should be taken to ensure that the right person is chosen for the job. Employers should always use a proven Auto Enrolment specialist with extensive experience of managing the entire end to end process and who has access to pension schemes from the whole of market. If the right Auto Enrolment specialist is used the savings they achieve will significantly outweigh their charges.
Employers will also have to pay contributions of 1% of their employees' qualifying earnings rising to 3% by October 2018. On top of all this, there's all the extra administration time, with reports of up to 33 individual administration tasks required to deliver each scheme.
The following five tips will help employers to significantly reduce the costs of delivering Auto Enrolment.
1. Choose the Right Scheme
There can be a significant difference in charges between the various pension providers and their schemes. Charges impact the employer and employee on an ongoing basis, therefore, it's extremely important not only to select a provider and scheme that offers the right features, but also one which offers the best value. A significant number of providers have dramatically reduced their charges in recent years so it makes sense for every employer to search the market and investigate all of the alternatives, even if they already have a scheme in place.
2. Careful Interpretation and Use of the Rules
There are a number of ways to set up an Auto Enrolment scheme and a wide variety of options in the rules which, if used correctly, can significantly reduce both initial and ongoing costs. For example, selecting the right contribution rate for each individual employee can have a significant impact on the monthly cost for both the employer and the employee. There are a whole host of other options available so it really pays to take the time to fully understand the rules and consider all of the available options before setting up the pension. Once set up it is not possible to change the contribution structure, therefore, it is important to get it right first time.
3. Tactical Opt Outs
Auto Enrolment may not be the best solution for all employees. In fact, it may be beneficial for some employees to opt out of Auto Enrolment altogether. Whether opting out is the right course of action will depend on the individual circumstances of each employee, but where it's appropriate to do so, significant cost savings can be enjoyed by both the employer and the employee.
It's important to note that Auto Enrolment rules prohibit employers from providing advice on opt outs. Therefore, if an employer does want to investigate this option, it's imperative to seek support from a qualified pensions specialist with experience in Auto Enrolment opt outs.
4. Salary Exchange
Another way to reduce costs that can benefit both the employer and employee is to offer a salary exchange arrangement. Salary exchange allows both the employer and employee to make significant savings through reduced national insurance contributions. Salary exchange can be great for most employees, however, there are certain circumstances which mean that it's not suitable for everyone. This has led HMRC to insist that if employers want to offer salary exchange as an option they should provide employees with access to advice.
5. Use an Auto Enrolment Specialist
Employers are highly unlikely to have the in-house skills required to ensure seamless delivery of auto enrolment in the most cost effective way. Using an outsourcer is the best way for employers to ensure that they are benefiting from all cost savings available to them. However, Auto Enrolment is a complex process to manage and in order to benefit from all of the cost savings available, great care should be taken to ensure that the right person is chosen for the job. Employers should always use a proven Auto Enrolment specialist with extensive experience of managing the entire end to end process and who has access to pension schemes from the whole of market. If the right Auto Enrolment specialist is used the savings they achieve will significantly outweigh their charges.
