The survey of 1,327 members of the IoD has found that 98% are aware of the requirement to automatically enrol nearly all staff onto a pension scheme to which the employer will contribute. This is a significant increase since the IoD questioned its members in 2011 when 20% said they were not aware of the legislation.
With auto-enrolment being introduced in stages, 62% of businesses said they were confident that they were ready to enrol staff when they hit their staging date, compared to 15% who were unconfident. However, smaller companies were less prepared than larger businesses.
The survey also revealed IoD members' concerns about covering the cost of employer contributions with 42% saying they would have to meet the contributions out of their profits. A fifth (21%) said they would have to freeze or cut salaries to find the money and 3% reported that they would be forced to make redundancies.
Malcolm Small, IoD senior pensions policy adviser, said: "Auto-enrolment is a new challenge for business, both in terms of costs and logistics. We still don't know how small firms are going to handle the burden – nearly half still feel unsure about the process, and many don't know if their staff are going to drop out."
Meanwhile, the National Employment Savings Trust (NEST) has reported that it is already working with over 300 employers in the first stages of automatic enrolment, and so far the NEST scheme has opt-out rates below 10%.
"The current low opt-out rates are promising,' says Graham Vidler, director of communications and engagement at NEST. "Our big challenge, as an industry, is to make sure that workers understand the benefits of employer contributions and recognise them for what they are – a helping hand from your employer to save for your future."
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Petaurum Solutions’ Comment
As Auto Enrolment gets near for the majority of Small and Medium Enterprises the mist is starting to clear around the costs that Auto Enrolment brings, however until schemes are actually up and running it will be some time until the true financial impact upon businesses are known. The other issue organisations are facing is not only how they plan to implement, but also maintain their Auto Enrolment commitments month on month.
At Petaurum Solutions we recognise this fact and can help organisations not only come to terms with what Auto Enrolment will mean for them specifically, but also how to make sure they are in the best shape to hit their staging date and are able to administer Auto Enrolment as part of their day to day business activities. Want to know more? Either sign up for our forthcoming webinars or contact us for more advice