As part of LP Auto Enrolment Solutions, I have helped many companies set up and run their auto enrolment schemes and support over 50 other firms including financial advisors and accountants. I am also Co-Chair of Friends of Automatic Enrolment in the South West. I think it is safe to say that there are not many scenarios I have not encountered so far! What I see are the same mistakes made over and over again, so here is my Top 10 list of auto enrolment mistakes to avoid!
- Employers just not doing anything. We have had one employer getting to two weeks before they are due to complete their Declaration of Compliance and asking what we can do to help start the project. Plan well in advance and engage with payroll and advisers well in advance of your staging date
- Not assessing employees because the employee has previously said they donâ€™t want to be enrolled and have said â€œIâ€™m OK boss donâ€™t put me inâ€¦â€ All employees must be assessed, automatically enrolled if eligible and then they opt out in their own time.
- Forgetting to check for opt outs and not applying refunds back into the employeeâ€™s pay each and every pay ref period
- Thinking postponement is the silver bullet that will move a given staging date and delay auto enrolment by three months. Your staging date does not change ever, unless of course you apply to bring it forward yourself.
- Thinking that, as a business has no-one who wants to be enrolled or needs to be enrolled that they donâ€™t need to set up a pension scheme. This is technically correct, but if you subsequently had a new employee, someone became eligible or an opt-in you have six weeks to set up a scheme at that point. Then you are way past your staging date so provider choices will be limited.
- Thinking you can use Postponement long after your staging date but not having actually told anyone or sent any notice out to employees, which you must do. Without a notice it never happened, assessments and contributions will need to be backdated. This may mean the employer picking up the tab for employee contributions as well.
- Believing the hype from their payroll provider that it will â€œset up a pension scheme itselfâ€. This only applies to specifying the pension scheme within the payroll itself and not setting a scheme up with the actual provider. Many employers read the sales literature and assume they donâ€™t need any help because their payroll software will â€œset up a scheme automaticallyâ€, it wonâ€™t.
- Thinking that NEST is a Government scheme run by Government for the sole purpose of accommodating auto enrolment. NEST is a privately run pension with its own agenda, influenced by Government and provided with â€œsoftâ€ loans to finance its set up. As a result it has a public service obligation to accept all employers regardless of size or date. But it is not the only option for employers and therefore it needs to be evaluated equally with other pension providers; it is not the default scheme to choose.
- Thinking that employee data will magically move from payroll software into the pension providerâ€™s web site. The data has to be manually uploaded and in specific file formats. Although this is something that may well change in the future, the employer still has to send the contribution data from payroll to their pension provider in the correct format, in a timely fashion.
- Thinking that the Inland Revenueâ€™s definition of an employee is the same as the Department of Work and Pensionâ€™s definition. It isnâ€™t and you need to be clear about the status of your employees whether they need to be included in auto enrolment. For example, some self-employed contractors will need to be assessed and enrolled where applicable into a Qualifying Workplace Pension Scheme (QWPS) by the company they contract to.
Hopefully these tips will be useful for you when you are about to start your own auto enrolment process but remember there is no substitute for engaging in the process early and learning from your own mistakes whilst you have the time!