What will automatic enrolment cost me?
You will need to contribute to the pensions of any staff who are eligible for automatic enrolment. In addition, there’ll be costs associated with setting up and running the pension scheme. This page highlights areas where you may incur a cost. However, the cost of implementing and maintaining automatic enrolment will vary widely between employers. Some may be able to absorb all the additional activity in-house, while others will turn to external suppliers or seek external advice.
Several areas of your business will be impacted by automatic enrolment. The main cost will be time and some areas will require detailed preparations. You may have to buy or enhance software to manage the day-to-day activities of automatic enrolment, eg payroll. Preparations will impact upon your staff’s time and you might decide to bring in additional help.
Costs associated with the pension scheme
Compulsory employer contributions are the main costs associated with the pension scheme. You’ll have to pay a minimum employer contribution for everyone you automatically enrol and anyone who opts in. The minimum amount is being phased in, starting at 1% and rising to 3% of staff’s qualifying earnings.
Getting the right business software
You’ll need software in place that can handle the requirements of automatic enrolment. This may be your payroll system or ‘Middleware’, offered by some pension providers. You may have to pay for any upgrades to your existing software. If an upgrade isn’t available, you’ll need to decide whether to get new software that’s been designed to handle automatic enrolment. Or see if you can get additional software and integrate it into your existing payroll system – there may be a cost for this.
You may be able to absorb all of the preparations in-house, in which case the main cost to your business will be time. We can’t tell you how much extra time you’ll need as this will vary a lot between employers. But you need to be aware that time will be a significant cost. Once automatic enrolment is up and running, there’ll be a little extra time required each month to manage the ongoing automatic enrolment responsibilities.
You are able to delegate many of the automatic enrolment duties to a third party, such as your financial adviser. If you do this, they may charge extra for their time and services. The main area in which you may want to seek financial advice is finding a pension scheme that’s most suited to your business.