The summer time often means that many employers take on extra staff to meet increased work demands eg fruit farms, holiday parks. Employers will have to consider the impact of seasonal workers and auto enrolment.
The first task is to assess the workers and see which category they fall into – eligible worker, non eligible worker or entitled worker.
Following on from that the employer must consider whether postponement is more beneficial rather than auto enrolling those staff particularly if the employer knows that the temporary staff will not be needed after three months.
An employer can only postpone automatic enrolment from:
- the staging date
- a staff member’s first day of employment
- the date a staff member first becomes eligible for automatic enrolment.
To postpone auto enrolling a member of staff the employer must write to them within six weeks from the date postponement starts. An employer can postpone for a maximum of three months, but it can be for much less than that. An employer can postpone as many or as few staff as is required and the postponement period does not have to be the same length for everyone.
Staff who have been postponed can choose to opt in during the postponement period.
On the last day of the postponement period, an employer needs to know whether any member of staff whose automatic enrolment who has been postponed is still eligible to be automatically enrolled. If they are, an employer must put them into a pension scheme straight away. An employer can not apply a further period of postponement even if postponement has been for less than three months.
Auto enrolment is set to ramp up as the country heads for complete auto enrolment of all employers by 2018. So far only 3% of employers have needed to comply but in the next few years the outstanding 97% will be implicated. There are obviously challenges ahead as resources become stretched both outside and within smaller businesses.
In 2015 45,000 employers are set to enrol and in 2016 it will be 45,000 employers per month. So far it seems that medium sized businesses have coped well however some have struggled to find a pension provider that will enrol all of the workforce and some businesses turned down completely by a private pension provider. As with all businesses return on investment is essential and it seems that some pension providers do not think that providing a pension scheme to a small to medium sized business is worthwhile. Others will disagree but may add hefty ongoing annual charges in order to ensure they make a profit. This leaves the smaller business in a difficult situation with the choice of pension schemes available dramatically reduced.
Research has shown that medium sized businesses have so far taken less time to prepare for auto enrolment and have had reduced implementation costs than the larger businesses who have had to comply since October 2012.
Many small and micro businesses have no experience of implementing a pension and do not have an active scheme in place. Many did not bother offering a stakeholder pension despite the fact that having 5+ employees this was required. Auto enrolment, however, can not be ignored. It seems, that awareness of the process is quite high, but action is required and early planning essential to comply with the staging date and avoid the hefty fines.
Demand for help with auto enrolment remains quite high. A high percentage of businesses will turn to their accountant. However, many are not able to offer any support. The IFA industry on the other hand has geared up to provide advice and guidance, but often will charge high fees to implement the process.
In 2014 the opt out rate for employees was running at 8% which is relatively low. Research shows that only 5% of younger workers are opting out whilst 28% of older workers are doing so. Affordability seems to be the key with these older workers as well as having an alternative means of saving for their pension.
It is thought that overall opt out rates is because of good communication processes offered by the larger employers that have had to comply so far. However the medium and smaller businesses that are now being affected do not have the huge resources available to provide communication processes such as seminars and workshops. Communication about the process is essential so that employees fully understand the implications of auto enrolment and saving for future retirement. The possible lack of communication resources may impact negatively on opt out rates in future, time will tell. There are a range of communication methods that smaller businesses could use including team meetings and newsletters. Ideally one to one meetings is best, but is obviously time consuming and may be difficult timewise.