Process and Protocols
The systems and processes you have in place may mean your employee’s salary and pension contributions are being paid, but how confident are you that the data you are processing each month is 100% accurate. The smallest error in your data could lead to a significant problem, particularly if you are reliant on software to process auto-enrolment.
Documenting workers categories
If you chose to exclude any category of worker from your auto-enrolment obligations, make sure you’ve documented the facts and reasons behind your decision for each case. Failure to auto-enrol employees could have future consequences should they challenge your decisions. Please note: a worker is not just those on PAYE.
Conducting an Audit
An audit represents good governance. Good governance demonstrates your commitment to due diligence and also acts to re-assure you that you’re doing everything right.
Before auto-enrolment, an incorrect address or date of birth wasn’t such a big problem but now these smaller data issues can have a huge impact. Remember; software only processes what you tell it to. Your pension provider will process the data you provide and won’t take responsibility for what you send. Make sure to validate your data, each and every time you process it.
You have a statutory duty to produce your records on demand should the Regulator require. How easy would it be for your business to provide these records if requested to do so?
Reviewing Your Pension Scheme Decision
Evidence from the Department for Work and Pensions suggests that some employers failed to take adequate due diligence in selecting an appropriate scheme for their employees and could face potential problems for their business in years to come.
By April 2019 you will be contributing 8% or greater of an employee’s wages into your chosen scheme and for many this is likely to grow to one of the largest assets they own. How are you going to protect your business should one of your employee’s challenges why you enrolled them into your chosen pension scheme?
What was your selection process? Do you have you a clear audit trail for your selection; the options considered and crucially how you determine it was appropriate for the needs of your employees?
A word on NEST (the workplace pension scheme set up by the government) – While NEST meets your statutory obligation to provide a qualifying scheme it does not offer any guarantees against potential future claims from your employees. You must still demonstrate why it was selected as the most appropriate scheme and how it compared to other options available
Time & Resource
It is worth taking a step back and calculating how much time auto-enrolment is costing your business each month.
Three questions you need to ask yourself:
- Are there any commonly occurring issues with monthly auto-enrolment?
- How often do you audit the delivery and processes of auto-enrolment?
- Would outsourcing auto-enrolment be more efficient for your business?
Some key areas to consider when calculating the true cost of auto-enrolment to your business:
If you’re managing auto-enrolment internally, whoever is tasked to deliver your responsibilities requires sufficient time and appropriate training to ensure a compliant delivery, as well as the need for further monitoring and governance.
Software and support
You will need some form of software, what was the overall set-up charge and what is the ongoing cost of this each month? If you outsource your duties to a specialist service provider, when was the last time you conducted a review and comparison of their services?
Risk & liability
Automatically enrolling your employees is one thing but making sure you’re fully compliant is another.
Over reliance on software or incorrectly set-up processes could lead to serious issues in the future. Even if this doesn’t lead to action from The Pensions Regulator it could mean significant costs in addressing historic issues and rectifying.
Have you compared the costs and risks of running auto-enrolment internally to outsourcing?
Out-sourcing to a reputable workplace pension specialist company should save time, resource and reduce risk. A good workplace pension company will provide support to your employees, whether through the choice of provider to ensure the right funds and options are available, or on-going support as the value of the asset grows*.
The greatest risk you’ll potentially face as an employer is from potential future claims from employees who believe they were disadvantaged by the choices you made or allege that you failed to follow the correct process.
As mentioned earlier, with contributions increasing over the next two years, the workplace pension is an increasingly prominent part of your remuneration package to employees.