AUTO ENROLMENT -TIME TO REVIEW
With more than one million employers yet to start, let alone finish their auto enrolment projects it may seem odd to be writing about reviewing the schemes already in place.
Well not really. For employers who had their Staging Dates in 2013, they will have to go through the auto enrolment process all over again for employees who did not join the scheme in 2016. There will need to be a further assessment of the workforce, communications sent out to employees and time and resource found to answer the inevitable questions from employees. 2017 will see the same process repeated for the 2014 stagers and so it goes on.
There is however a bigger question in all this and that is ‘is the scheme delivering what we thought it would’ or put another way ‘is the scheme causing us grief in our day to day business’. Some of this may be around processes for leavers, new joiners and employees who opt out and some around the pension provider itself. There is plenty of evidence to suggest that employers are having second thoughts about decisions made three or four years ago.
Why this is and what can we do about it?
Like all new legislation, there is a lot of learning to go through before you can claim to be an expert. Legislation when the regulations are detailed, complex and delivered late in the day from government meant that inevitably there was a lot of learning on the job when it came to auto enrolment. Decisions were made which, with the benefit of hindsight, would not be made today. There was uncertainty about who was doing exactly what from the payroll, HR or pension provider. Equally providers made all sorts of promises around processes and service delivery which at best became difficult to keep.
Some payroll systems were unable to cope with undertaking assessment analyses. This meant that lots of companies were forced to use third-party middleware software to enable their payroll applications to talk to their pension providers’ systems, which did not always work. Common errors revolve around incorrectly certifying contributions due to confusion about how different job statuses or salaries should be defined – and in recruitment companies these risks are greater than in other industries.
That a number of pension providers have changed their back office administrators tells us who know something about administering pension schemes that contracts were signed in a hurry and without a clear understanding of what both parties were getting into.
We are now seeing employers coming to us to carry out a review of providers and processes to make them slicker, automated (manual workarounds are the curse of auto enrolment) and allow the business to get on with what it is good at, rather than having to learn how to be pension technicians.
Brave new world
Just because you are where you are does not mean that you have to accept this as where you have to be.
Taking the opportunity to stand back and review the auto enrolment scheme will give you the chance to examine what has gone well and what has gone less well. A point often missed is that the responsibility to select the pension provider falls on the Employer, not any consultant who is working with them. From this it follows that there has to a due diligence process to support the selection of the pension provider. If the Pension Regulator comes knocking, or worse a disgruntled member, it will be a major help if you can show a report comparing potential providers and scoring them on a number of criteria, rather than saying that this was the only provider on offer at the time.
Software is not knowledge, it can help with processes (and occasionally hinder them) but it cannot track and monitor the employee experience. As such, there is an opportunity to review working methods and developments made by payroll and pension providers to make sure that:
- The right contributions are being deducted from the right employees at the right time
- The employee assessments are being performed correctly each time the payroll is run
- The final stage is to ensure that that the contributions are paid to the right investment fund (as not everyone opts for the default investment fund)
I’m not saying that you need to throw away all of your auto enrolment pension scheme and processes. I am saying that you need to take the opportunity to review in order to:
- ensure that the existing scheme and processes are helping you to run your business, not hindering them as some we have seen clearly are
- the right deductions are being paid (remember in 2017 and 2018 both employer and employee contributions increase)
- are providing value for money to both you as an employer but as importantly to your employees
We are here to help.
Telephone Michael on 0845 4334 199 or email Michael@clarkbenefitconsulting.co.uk