5 common myths about auto enrolment

Automatic enrolment is here for many small businesses. However, despite the changes that lie ahead, it appears that there’s still a lot of confusion and lack of understanding among businesses about their obligations as employers and the real day-to-day work that automatic enrolment calls for.

With staging dates approaching for small companies, now is the time to for us to help you to dispel confusing myths and misconceptions. Check out some common assumptions that employers have about auto enrolment and find out how to avoid making mistakes:

Myth 1

“I outsource my payroll, so I don’t have to worry about it do I?”

Even if you don’t directly handle your payroll, as an employer, you will be legally responsible for making sure that you’re prepared for the changes and will be compliant with new automatic enrolment legislation.

The Pensions Regulator recommends allowing 12-18 months for preparation and implementation. If you don’t already know your auto enrolment staging date – find it out here. Once you’ve got that, read our auto enrolment preparation advice to see what you should be doing, and when.

Myth 2

“If we ask our payroll team to work a few more hours our systems won’t need to change, will they?”

The new pension arrangements do have to be integrated into existing or new payroll processes and compliance will bring with it the administrative burden of additional record-keeping and routine data submissions to The Pensions Regulator.

You may find that this added pressure is a lot for your current payroll team to deal with and therefore you may need to introduce payroll software that can handle auto enrolment legislation to help your team save time, and of course, money!

Myth 3

“I’ve been told that because lots of people will opt out I don’t really have to have everything sorted by my staging date, do I?”

Eligible workers (those between 22 and state pension age, earning over £10,000 per annum and working in the UK) are required by law to be automatically enrolled on a workplace pension scheme.

Research from Scottish Widows has discovered that the number of workers opting out of their workplace pension is only 8% which is substantially lower than the initially predicted 30%.

Don’t forget that you may also be faced with employees who, although they don’t meet these criteria, are able to opt in. As you can see, assessing your employees can be a time consuming and confusing task!

Follow our simple flowchart to find out the eligibility of your workers.

Myth 4

“I already have a pension scheme in place so don’t need to worry as I can offer this to my employees…”

Automatic enrolment is a key part of the Workplace Pension Reform and you will have new legal duties and conditions that your existing company pension scheme may not meet. You’ll need to make sure you assess all of your employees not just ones in an existing scheme and you’ll also need to check that your existing scheme is a qualifying pension scheme.

Check out guidance from The Pensions Regulator to see if you have a qualifying scheme. Put simply, if you’re an employer in the UK then you will, by law, be required to address your automatic enrolment obligations and make the necessary changes.

Myth 5

“I don’t need to start auto enrolment too early as I can use postponement to give me 12 weeks extra time…”

Auto enrolment, although manageable once you get to grips with it, will take time to plan and prepare for. Postponing won’t necessarily make things easier for you as there are certain rules to be abided by and these could cause problems and more work – such as having to write to all of your employees to tell them you are postponing and you’ll then have to reassess them again, once you do stage.

*Automatic enrolment earnings thresholds for 2015/2016 and correct at time of publishing. These figures are expected to change each tax year.