Amid growing realisation among advisers and pension providers that the yet-to-be rolled out auto-enrolment regime will be rigorous, payroll solutions are being developed to help employers with auto-enrolment.
“Compliance will be quite difficult if employers have to use manual systems. Implementation issues such as how to manage the opting out process are genuinely being underestimated. For big companies with normal staff turnover of around 10–15%, there will be many cases to deal with and eligibility criteria will need to be a fairly automated process. Payroll providers have not stepped up to the plate, so at moment there is something of a vacuum,” said Duncan Howorth, chief executive of JLT Employee Benefits Group, one of the few providers that have already developed its own auto-enrolment software application.
Providers such as Aegon and Scottish Life believe firms that offer automated auto-enrolment packages have a clear advantage, and they will be pushed out of the market if they only offered pensions solutions.
There are serious financial implications for non-compliance, said Gail Philippart, principal consultant at AON Hewitt. “There is quite a lot of work to be done around processes and payroll to ensure employers are complying and fulfilling their obligations. There will be a Big Bang at each employer’s staging date, but every time an employee joins after that, there will be processes to go through, and the penalty will be (up to) £10,000 a day for non-compliance,” said Ms Philippart.
“Some employees need every penny of their pay for their monthly outgoings so timing will be of the essence. New joiners will have to be quick to opt out to avoid the first month’s contributions being taken. If you need that money to feed the family, then I can see a lot of problems for HR departments as people come to them saying that money has been taken from their pay and they do not have enough to live on,” added Ms Philippart.