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Setting up a workplace pension sounds like it should be a piece of cake for a company like the International Association of Bookkeepers.
“It has been a challenge,” said the Kings Hill-based group’s chief executive Malcolm Trotter.
His company, which employs nine people, began looking at workplace pensions in 2012, something nearly all businesses will need to have in place within the next few years.
Since then, it has been a slog but the IAB are one of the organised ones. They have decided to put their pension in place 18 months early because of the large number of firms whose schemes are set to go live at the same time as theirs next year.
“The advice from our independent financial adviser was to stage early because of the strong potential for delays or, at worst, a meltdown in the pensions industry,” said Mr Trotter.
“If I was a micro-business trying to handle this, without any prior pension in place, it would be a nightmare.
“It is something an ordinary employer is very likely to get wrong and would certainly find very daunting when you have people leaving and joining, or people who might want to opt out.
"It gives you all kinds of headaches even if you are properly aware of it all.”
The drama goes back to the passing of the Pensions Act 2008, which stated every business in the UK must have a workplace pension in place for its employees by 2018. The measure has been dubbed auto-enrolment.
All workers aged between 22 and the state pension age who earn at least £10,000 a year and work in the UK must be enrolled.
All employers must then contribute at least 1% to the pension scheme for those workers if it goes live before October 2017, rising after that.
Many larger businesses have already put one in place with smaller firms set to receive their “staging date” over the next few years, by which time they will need to have their pension scheme operating.
The Centre for Economic and Business Research estimated from 2012 to 2017, the total auto enrolment one-off, set-up costs for the UK’s 1.26 million businesses with fewer than 500 employees is expected to be £15.4 billion.
It also estimates the one-off time burden of setting up a workplace pension will be about 103 working days (about six months) plus three and a half days every month once it is in place.
This year, companies with fewer than 30 employees will begin receiving letters informing them of the date their workplace pension must be up and running.
The order in which businesses “stage” is determined using their PAYE reference number, which can be checked on the Pensions Regulator website, although there appears little order behind which companies stage before others.
If they fail to have one set up in time, they face heavy fines.
“You get a letter a year in advance and a lot of companies think ‘I’ve got 12 months’ and put it straight in the bin,” said Roy Bedford, south regional director of Enrolment4u, a company which offers to set up workplace pensions for small businesses.
“No one realises how many people it affects and how difficult it is going to get to put an auto-enrolment pension in place.
"If you go into any shop on the high street and say ‘I’ve come to talk to you about workplace pensions’ the first thing they will say is ‘I don’t need one’.
"Most don’t realise they have got to have pensions in place.”
“It is something an ordinary employer is very likely to get wrong..." - IAB's Malcolm Trotter
The only businesses which do not need to set up a workplace pension are sole traders or a partnership where both people are equal.
Any other company, even if it only employs one other person, needs to have the system in place.
Noncompliance can mean an initial fine of £400, rising each day, seven days a week.
Dunelm Mill, the soft furnishings company with branches in Ashford, Broadstairs, Canterbury, Dartford, Maidstone and Sittingbourne, found they had underpaid £143,000 in employee pension contributions when they missed their staging date.
Companies have to read a 254-page guide, detailing 854 rules and two pieces of legislation.
“Dunelm Mill have their own accountants, lawyers and financial advisors and they had two years,” said Mr Bedford, who lives in Wrotham. “If they didn’t get it right, what hope has the local corner shop got?”
Should an employer not have a workplace pension in place on their staging date, the Pensions Regulator will issue a compliance notice and allow a reasonable amount of time to put measures in place to prevent a repeat of the noncompliance.
Should this not be adhered to, the initial fine for noncompliance is £400. It then rises daily, seven days a week, by:
DSH accountants, based in Maidstone, has auto enrolled six of its larger clients so far and is now enrolled itself.
“When our smaller clients come on board, then we will start getting lots more calls,” said payroll manager Colleen Wendell.
“It will be news to a lot of them. We also had a client say the contributions meant he was not going to be able to afford a salary rise. It can take a lot off their bottom line.
“It is going to come out of the woodwork this year when smaller clients start to stage. When companies find out what they have to do, they will want someone to take it on for them. I imagine we will get clients on the back of this.”
Companies with more than 250 employees should have auto enrolled by now.
Staging dates for other employers are:
