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Franchises must act now on pensions auto-enrolment

Written by Ryan McChrystal on Monday, 12 January 2015. Posted in Finance

Auto-enrolment pensions will soon roll out to all companies with between 30 and 50 staff. Franchises have much to consider to make sure they don’t fall foul of the new regulation

Franchises must act now on pensions auto-enrolment

In order to enhance personal pension funding, the government has drastically changed the laws and regulations around pension provisions supplied by employers. Auto-enrolment (AE) should be viewed as a great opportunity for businesses to help support their employees. It is being staged out over a period of six years, which started with the largest employers in 2012. Following a fairly successful start among bigger firms, it will roll out to all businesses that have between 30 and 58 employees – which will undoubtedly include many franchises. 

By now most staff are likely to have heard about AE in the media but as an employer it’s your legal duty to make sure they know enough. If you haven’t already, now would be a good time to start raising awareness about how the changes will affect staff. You should also know that all employers are legally required to automatically enrol certain staff into a pension scheme and make contributions.

The Pensions Regulator has already issued its first fines to employers for not meeting their duties so it’s important for franchises to ensure that they are fully compliant with the law. 

For many companies, the staging date at which they are expected to enrol eligible employees is fast approaching. Companies should find out theirs as soon as possible in order to keep themselves on the right path. This is something that can be obtained easily from the Pensions Regulator website by entering your PAYE reference number. 

It is important not to miss your date as this could land you in trouble. “Non-compliance could lead to the regulator to issue fines up to £10,000 per day for the largest employers,” says Karen Bexley, director and head of employment law at MLP Law.

Employees are only eligible for auto-enrolment if they meet certain age and earning criteria. “As franchises often employ a diverse workforce with different pay and employment contracts, determining whether certain members of staff qualify, or the correct amount of employer contribution, can be a real challenge,” says David Foskett, managing director at ADP UK & Ireland, a supplier of payroll, time and attendance, and HR outsourcing.

“Implementing auto-enrolment can be a complex process, requiring the knowledge and input of various functions. By having a dedicated project team in place involving departments such as finance, payroll and legal, as well as franchise owners and external consultants, businesses will be able to ensure a successful transition. This also supports them in communicating the changes to staff and ensuring that employees understand how the new regulation affects them and what their options are,” he adds.

If you have an existing pension scheme for your workforce you should check with your provider to see if you’re able use it for AE. If you need to open a new scheme, make sure that you approach the provider in good time because they will be taking on thousands of employers in the coming months and there could be delays. “To comply with the new regulation, franchises should not only find a suitable scheme provider but also put systems in place to monitor jobholders, who may become eligible because of earnings or age in the future,” says Foskett. For example, employees under 22 and those receiving variable pay require careful attention. “Reviewing payroll and administration systems at an early stage can help franchises to ensure that they are compatible with these new requirements,” Foskett says.

It’s critical to find a partner that can not only support the AE process but also work with you to ensure that your employees are benefiting from the scheme. 

“The key to implementing auto-enrolment successfully lies in the planning,” says Graham Wrightson, pensions partner at international law firm Stephenson Harwood LLP. Employers have found they needed to start preparing up to a year before their staging date, so you should start making plans in good time. Although AE began in October 2012, it rolled out with bigger companies first, so there is still time for SMEs and franchisees to get prepared.

Before staging, find out who to enrol. You will need to assess all your staff for eligibility but you may not have to automatically enrol all of them. Communications to members are subject to prescriptive and detailed requirements and time is required to ensure they are fit-for-purpose. “At the end of the day, the legislation is complex and sets down strict timings and specific standards; experience has shown that it is easy to become non-compliant without even realising it and companies should take heed that the regulator is starting to flex its muscles to ensure compliance,” Wrightson says.

Clare Abrahams, head of auto-enrolment at Aon Employee Benefits, said: “Franchisees need to take the same steps to prepare as any other employer. We find that many benefit from economies of scale as they can go into deals for advice and solutions as a group of employers and share knowledge. For example, we have offered significant discounts on our Littleblue auto-enrolment product when approached by a group of employers.”

However, there are some pitfalls to be aware of. “Importantly, it is absolutely essential that you plan ahead and visit the Regulator’s website to get confirmation of your staging date. Since many franchisees can share payroll resources (or may have done in the past) or evolved from mergers, acquisitions or break away companies, they could end up with a staging date that is very different to what might be expected for the size of their workforce,” Abrahams adds.

They also need to consider carefully which employer the contracts of employment actually lie with and who specifically falls under their employer auto-enrolment duties. 

About the Author

Ryan McChrystal

Ryan McChrystal

In a previous life McChrystal wrote about asset management in the Middle East. A history and politics graduate from the north of Ireland, he now focuses his efforts a little closer to home. When he's not knee-deep in journalism McChrystal fancies himself as a bit of a globetrotter. In the summer of 2014 he completed his second US road trip, spanning the east coast, but Americans will be glad to know he'll be giving them a break for a few years before returning. McChrystal is a music geek and proud parent of a dwarf rabbit named Dylan.

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