More SMEs to be affected by auto-enrolment

Griffin Stone Moscrop & Co (GSM) are warning that SMEs are likely to struggle to budget for auto-enrolment.

Recent data from The Pensions Regulator has revealed that approximately half a million more businesses will have to enrol than previously anticipated and will face higher employment bills as they setup their pensions.

Apparently, around 1.8m small and micro employers will need to meet their pension duties over the next three years, compared to the previous estimate of 1.3m. Under the new regulations, employers must contribute at least one per cent of eligible employees’ qualifying earnings, rising to two per cent in April 2018 and then three per cent a year after that. However, these contributions are not subject to National Insurance (NI) and they can be offset against business profits for tax purposes.

In addition to the employer’s contribution employees’ will also be required to make contributions which many employees will see as an extra deduction being made by their employer and it is essential that businesses communicate clearly and at an early stage with their employees to avoid any negative feelings.

But as well as the financial implications this will have for SMEs, businesses could be hit with further costs if they fail to comply with their duties as an employer. If a scheme has not been established by its staging date, the cost could escalate, with fixed penalty fines ranging from £50 to £2,500 a day.

Jenny Tolmie, Partner at Griffin Stone Moscrop & Co (GSM) said: “It is important to remember that the contributions must be paid into your scheme at each pay reference date. I would therefore advise SME owners to calculate how much they are likely to have to pay in contributions at each date, and set their budget accordingly.

“GSM can help by providing payroll services as well as sound financial advice for SMEs. Receiving help can reduce the cost of auto-enrolment for your business by ensuring that you’re compliant and avoid financial penalties,” concluded Jenny.

To find out how Griffin Stone Moscrop & Co can assist you with your auto enrolment requirements, please contact Jenny Tolmie on 020 7935 3793 or via email jtolmie@gsmaccountants.co.uk

The author is a partner in Griffin Stone Moscrop & Co, a member of UK200Group which has offices throughout the UK and Associates overseas.