With auto enrolment affecting millions of small businesses around the UK, SME Insider spoke with Andy Beswick, head of business solutions at Aviva. He told us about the problems SME owners are facing with the staging process, and revealed what accountants can do to help the 480,00 businesses that need to set up their pension scheme by the end of next year.
What have been the biggest auto enrolment challenges for SME owners?
I think the challenges are yet to come.
Over the next couple of years 1.8 million SMEs with less than 30 employees are required to stage, so the crucial challenge for employers is to understand the essential information in a timely and relevant fashion, which will allow them to get everything they need to comply.
On January 1st, nearly 500,000 small businesses will have to begin enrolling their employees onto a pension scheme. As we approach that date, do you think these SME owners will experience the same problems as those who’ve already signed up to the initiative, or will they experience new problems?
I think they will have different challenges, however their schemes will be simpler, as this half a million include businesses with less than 30 employees.
On the other hand, these business owners won’t have a HR department and will have to do all the work themselves on top of running their business. This means that it’s crucial for practitioners and financial groups to provide relevant and digestible information to these smaller companies.
What one piece of advice can you give to these SME owners who are going to tackle auto enrolment alone?
Plan early. The earlier that they can plan and understand the steps that they need to go through, the better.
There is lots of good information out there; Aviva for example has an auto enrolment guide that breaks the activities down into individual chunks. There are many small business owners that leave auto enrolment to the last minute and that’s the worst thing you can do.
According to the Pensions Regulator, just 29 per cent of small businesses are fully aware of the date they are supposed to stage. Why do you think this is?
There are a number of factors. Auto enrolment is complicated – there is no denying that.
Also, a lot of the activity that is trying to raise awareness (Aviva is working with the DWP for example) has only started relatively recently. The amount of noise and promotion that we are starting to see will help SME owners, but there is no doubt about it – auto enrolment isn’t at the top of the list for small business owners.
What support is out there for SME owners to navigate the auto enrolment process, and are some solutions going far enough?
I think we are seeing multiple levels of support. The DWP’s Workplace Pension ‘monster’ is raising awareness on a national level, and now we are beginning to see individual providers giving small business owners specific support and information which will make the process as easy as possible.
From us at Aviva, we’ve just produced a guide to auto enrolment which is bringing together opinions from different parts of the industry to allow employers to make the right choice, which I think is the right thing to be doing.
I think on a very practical level our auto enrolment guide is hugely important; giving information is the first step as it helps business owners make important decisions. You then have to then explain how auto enrolment affects each individual, and that is what our guide hopes to achieve, but I’m sure other people in the market will be providing similar information.
There are some business owners who are aware of the need to stage but have not done so, claiming that the process is too difficult for them to complete. What areas in the staging process are most liable to be causing SME owners problems?
Auto enrolment is a journey for business owners so you have to break it down into stages. The first stage is awareness; SME owners realise that this is something that needs to be done, but they are refusing to do it.
The second process requires people to gather and understand key information about their company. SME owners need to answer several questions; how many eligible employees do they have? What is their staging date? These are key questions that need to be answered before they go any further.
The third phase is making sure that the process they adopt is right. Many small employers for example will outsource their payroll instead of doing it in-house. Making sure that the payroll they’re outsourcing is compatible with their pension provider is really important.
Is there anything more you’d like accountants to do for their small clients?
Accountants are really important in this area. We know that many employers will reach out to practitioners first to help them with the process. I think accountants are doing a good job of being experts in auto enrolment, but they should ensure that they are promoting their services to their employer as much as they can.
I also believe that timing is hugely important. We’ve been working with the Chamber of Commerce recently and in a meeting where accountants were present, they said that they offered help to small employers 12 months before the staging date when the take-up was poor, so the reality is that this help was offered too far away from a time where auto enrolment actually impacts small businesses.
What challenges does auto enrolment offer accountants when dealing with small businesses compared to working with large or medium-sized enterprises?
There are a couple of things. One is the relative level of knowledge that small employers have. Larger companies will have an army of people working on the company’s pension scheme, but with an SME, accountants have to really understand exactly what part of auto enrolment they are struggling with, because they are doing everything themselves.
The second thing is that accountants will sometimes have to do is help smaller employers communicate with their staff. Sometimes employees don’t understand what the benefit of auto enrolment is, so the responsibility falls upon the employer to educate them. This is where an accountant can come in handy because SMEs usually won’t have a dedicated HR department.