Nicklin LLP is warning that SMEs are likely to struggle to budget for auto-enrolment.
Recent data from The Pensions Regulator has revealed that approximately half a million more businesses will have to enrol than previously anticipated and will face higher employment bills as they set-up their pensions.
Apparently, around 1.8m small and micro employers will need to meet their pension duties over the next three years, compared to the previous estimate of 1.3m. Under the new regulations, employers must contribute at least one per cent of eligible employees’ qualifying earnings, rising to two per cent in October 2017 and then three per cent a year after that. However, these contributions are not subject to National Insurance (NI) and they can be offset against business profits for tax purposes.
In addition to the employer’s contribution, employees will also be required to make contributions which many employees see as an extra deduction. It is essential that businesses communicate clearly and at an early stage with their employees to avoid any negative feelings.
As well as the financial implications that auto-enrolment will have for SMEs, businesses could be hit with further costs if they fail to comply with their duties as an employer. If a scheme has not been established by its staging date, the cost could escalate, with fixed penalty fines ranging from £50 to £2,500 a day.
Chris Cook, Partner at Halesowen-based Nicklin LLP said: “It is important to remember that the contributions must be paid into your scheme at each pay reference date. I would therefore advise SME owners to calculate how much they are likely to have to pay in contributions at each date, and set their budget accordingly.
“Nicklin LLP can help by providing payroll services as well as sound financial advice for SMEs. Receiving help can reduce the cost of auto-enrolment for your business by ensuring that you’re compliant and avoid financial penalties,” concluded Chris.
If you would like help with auto-enrolment or are unsure of your responsibilities, please call Chris on: 0121 550 9916.