What we can learn from the first 3 years of AE

Oct 20, 2015

From the blog: Auto-enrolment was always going to be something of a movable feast since the scheme began three years ago.

Initially the challenge was to enrol just a small number of employers, each with very high numbers of employees.

Now, the challenge has shifted and auto-enrolment for the next two years will be all about the 1.8m small-to-medium enterprises and micro-employers, who could have as few as two members of staff each.

When auto-enrolment was introduced in 2012, it came on the back of the real-time information payroll changes for the larger employers.

When the first tranche of large companies looked to their payroll providers to help them manage auto-enrolment, they soon found that many payroll companies were still trying to get to grips with RTI and were not in a position to take on the challenge of auto-enrolment as well.

The consequence of this was that in the early days of staging, many assessment records were inadequate.

To date this hasn’t proved an issue, but it may become one as those who have already staged start to think about re-enrolment.

We have already seen a rise in the number of enquiries we are getting from companies looking to audit their data as senior teams become concerned about legacy assessment data.

Following these audits, some employees could be enrolled up to two years late and employers will have to backdate their contributions.

Payroll automation needed

The payroll software now available to employers has improved, but some systems still only provide the minimum of help.

Additionally, the majority operate as standalone systems, with very few packages integrating into the auto-enrolment pensions market.

So far, only four payroll providers have tried to integrate with a pension provider, out of the 400 packages available on the market.

With the move into the smaller-employer end of the market, there is an increasing need for automation in auto-enrolment.

In just a few months there will be more than 100,000 employers starting their auto-enrolment commitments, which will require a high degree of automation if they are all to successfully enrol.

These employers will rely heavily on payroll bureaux, many of whom are small and don’t have the specialist knowledge or the time to process the duties.

As a result, there will be a need for systems that can take this burden away from them.

Payroll is a low-margin business, yet requires a highly sophisticated system. The challenge, therefore, will be around delivering this kind of system to the mass market at a price point that works for everyone, probably on a ‘pay as you use’ system.

Without this automation, it will not matter which pension scheme provider is chosen, as millions of employees will never reach the point of being enrolled and the good intentions of auto-enrolment will be at risk of coming undone.

Robert Barksfield is Business Development Manager at ITM

View here for online article

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