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Four myths about small businesses and auto-enrolment

John Nelligan


There are quite a few common myths surrounding small businesses and auto-enrolment into pension schemes.

And with automatic enrolment being phased in across UK employers, we’ve put together a handy article to dispel the top four myths.

1. The government will drop auto-enrolment for smaller businesses There is absolutely no indication that anyone will be exempt from auto-enrolment.

The government has been wanting to set this up for a long time and even the changes that will come with Brexit and a new PM are very unlikely to reverse that. Auto-enrolment is here to stay. There is a myth that auto-enrolment is an expensive process for SMEs when it really isn’t.

The employer’s contribution is 1% of an employee’s salary, rising to a maximum of 3% for employees earning over £10K a year. Statistics suggest that many lower paid staff are opting out anyway, but employers should note that auto-enrolment can be very good for staff retention.

Initial setup costs may be around £3-500, but after that, it really is something you can look after internally for nothing. Auto-enrolment is not as expensive or time consuming as many SME owners think it is. Yes, it’s another thing on your to do list, but it’s really not a biggie and could keep your much needed staff happy.

2. Auto-enrolment doesn’t apply to you if you only have seasonal workers It’s completely false that auto-enrolment doesn’t apply if you only employ seasonal workers. It applies for every employee earning over the weekly threshold of £192.

3. You can’t bring your staging date forward Of course you can bring your staging date forward. Many small businesses are already doing so to get it ticked off their to do list. Most SME owners are also bringing the staging date forward because they appreciate the staff retention benefits. There is real value in auto-enrolment, especially for employees, so most SME’s want to get it up and running as soon as they can.

4. Your business is compliant already if it has an existing pension scheme This is a HUGE maybe. Your business may already be compliant if it has an existing pension scheme set up but you must check with your pension provider. In our experience of helping SMEs with auto-enrolment, the vast majority of existing pension schemes are compliant, but there will always be the odd one or two that aren’t. Non-compliant schemes are usually those that charge large fees.