By Matt Ritchie
Half of UK employers fear the cost of auto-enrolment will be up to 10 per cent of their payroll and most did not anticipate recouping the extra costs through measures such as limiting future pay rises, a survey by law firm Eversheds has revealed.
The survey of 245 employers found 36 per cent of respondents were yet to estimate the cost of auto-enrolment for their organisation, and more than half had not prepared for the new worker protection provisions which came into effect from the start of the month.
Forty-one per cent of respondents said they wanted the duty to be changed to allow workers to opt-out in advance, rather than requiring employers to enrol reluctant workers despite their opposition.
Eversheds partner Teresa Dolan said fifty-four per cent of respondents did not anticipate recouping auto-enrolment costs from workers.
Dolan said that while the government’s aim with the introduction of automatic enrolment was to encourage more people to save for their retirement, there would inevitably be friction in workplaces when employers explain to eligible workers that they cannot opt-out in advance of being automatically enrolled.
“As a result, an employer will still need to enrol such workers even if they have previously asked not to join a pension scheme, leading to possible complaints from workers.
“In addition, where an eligible worker opts-out, he/she will need to be re-enrolled into a qualifying pension scheme approximately every three years from the employer’s staging date, whether or not they continue to object. These and other administrative burdens associated with automatic enrolment mean it is unsurprising that most respondents identified administration as their greatest challenge. It also underlines the degree of detailed planning, and changes to IT, payroll and HR systems, that is required to ensure compliance.”