Pension deadline looms for 90,000 Yorkshire SMEs

Over the next three years, 90,000 small and micro-businesses across the region will be legally required to provide a workplace pension, or face action from The Pensions Regulator.

However, with just months left before thousands of small businesses must provide pensions for the first time, there are continued concerns about the burden the rules may cause.

From January 1 2016, thousands of companies who employ under 30 people must enrol and pay pension contributions for staff.

Firms who fail to meet their legal duties could be hit with a £400 fine. Additional daily charges of £50 or more could be levied against businesses that continue to flout the rules.

Charles Counsell, director of The Pensions Regulator’s auto-enrolment division, said businesses should already be “gearing up” to comply with the rules.

“If they are not, then they should act now,” he said.

“We know that the majority of employers want to do the right thing for their staff and we are here to help, but those who leave their plans to the last minute risk financial penalty.

“Whether you are a florist, a builder or run a pub, automatic enrolment applies to you.”

The Department for Work and Pensions (DWP) launched auto-enrolment in October 2012, with the country’s largest employers being required to put suitable pensions in place for workers.

Across the UK, 1.8 million small businesses will be required to set up schemes between now and 2018.

While the Government has deemed the policy a success, industry figures are concerned about how smaller companies will cope with the changes.

Simon Williams, North Yorkshire regional chairman at the Federation of Small Businesses, said small business face “very different challenges” to large firms.

He said: “They are not pension’s experts and many will be reliant on clear guidance and support to comply with the requirements. All of the focus needs to be on helping small and micro employers to comply.”

Compliance with auto-enrolment must be low cost and entail minimal administrative burden, he added.

“We still remain concerned that this won’t be the case for many small employers, and that many will face additional administrative as well as payroll costs.”

Ruth Bamford, pensions specialist at law firm Walker Morris, said there are a number of practical challenges that are likely to be time consuming for small businesses to meet the new rules.

She said: “Small businesses will be much more reliant on advisers, whether they’re business advisers or accountants, to ensure they comply with the law.

“And while there is a lot to be said for advice, it does come with a cost, on top of the cost of making contributions. Businesses will need to balance that.”

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Under auto-enrolment, all staff aged between 22 and state pension age, who work in the UK and earn more than £10,000 must be signed up to a pension.

Businesses must sign up to a scheme that meets criteria set by The Pensions Regulator.

The deadline for enrolling staff - a company’s ‘staging date’ - depends on the number of people employed by business.

Workers pay a one per cent of earnings into the scheme, with an extra one per cent from their employer. This will rise to a five per cent and three per cent respectively by 2018.

Staff can ‘opt out’ of the scheme if they do not wish to save, but must be re-enrolled every three years. Employees who are not eligible to be enrolled can ask to join.