Time and cost of auto-enrolment are among the biggest concerns for SMEs in 2016

By Jess Shanahan

The new legal requirement to automatically enrol staff in a pension scheme was cited by SME managers in the UK as one of the biggest challenges facing them this year. Other hurdles facing SMEs are finding employees with the appropriate skills and lack of funding.

Out of those who identified a business challenge, one in five considered the time and costs associated with the auto-enrolment pension scheme to have a big impact on them, with respondents even saying they feel bullied into it. Specific comments include: “I really do not know how I’m going to put money in the pot to pay for it.”

Another manager commented: “we already have pensions here but now I’m being forced to give them to my staff by law; they are bullying you into it.”

Jill Barnes, the chief executive of Exemplas, said: “Our detailed research and conversations with managers from a range of UK SMEs shed light on a number of pressing issues facing the sector as we enter 2016. The coming year is likely to prove a challenge for small and medium–sized enterprises in many ways, from the perceived skills shortage among young recruits, to the ability to diversify and enter new markets, and also keep up with ever-changing industry specific regulations.

“The Government’s Comprehensive Spending Review has impacted funding provision for support and, with the closure of the Business Growth Service in particular, SMEs are struggling to access the support we know they need to grow.  Understanding the key business challenges will help policy makers and business support organisations tailor this support to where it’s really needed.

“One of the biggest challenges identified was the impact that the legal requirement for an auto-enrolment pension scheme will have on their already stretched time and finances. In particular, smaller companies we surveyed commented that they simply do not know where the money will come from to fund this scheme.”

Rich Preece, Europe VP and Managing Director at Intuit QuickBooks said: “Nearly two million small businesses could be hit by costs up of to £2000 as auto-enrolment takes hold. With fewer resources, these firms are facing a real test, having to get to grips with the law and battle through paperwork to make themselves compliant with the legislation.

“Our own research revealed that many micro-business owners are unprepared for the major impact that auto-enrolment could have on their organisation, with 40% either not knowing or not thinking it will cost anything to set up. On top of this, 34% admitted they would consider offsetting any financial implications from auto-enrolment and the increased contribution into staff pension pots by capping staff salaries and/or bonuses; with 19% claiming they would have to reduce employee benefits and entertainment as a result.

“Auto-enrolment will affect almost every person across the UK in some way, and so it is worrisome that vulnerable micro-businesses aren’t getting the support they need to ensure they’re not only compliant with their staging date, but also set up for the ongoing impact that workplace pensions will have. It’s important they’re getting the education they need now on the issue and that systems can be put in place to manage the tasks ahead.

“Getting a complete overview of the finances and what’s coming in versus what’s going out will also help. Small firms will be in a much better position to plan ahead for the additional expenses they may incur as a result of auto-enrolment. No-one loves doing the books, but by moving them online and working more closely with an accountant, they’ll be ready for auto-enrolment and more importantly, able to focus on doing what they love for their business."

You can find out more about auto-enrolment here.

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