Preparing for automatic enrolment

Pensions auto-enrolment, also known as the Workplace Pension Reform, represents one of the biggest challenges for HR and reward professionals in decades. From October 2012, depending on the size of company, all eligible employees must be automatically enrolled into a qualifying company workplace pension scheme unless they decide to opt out. The changes come with a huge potential administrative burden, but they also present an opportunity for employers. Rather than seeing them simply as a financial liability and yet another piece of legislation with which to comply, a legitimate business case can be made for treating auto-enrolment as a vehicle through which to increase engagement.

When devising their action plan, the HR, Payroll or Finance Director must arrive at the best solution possible for their organisation and its employees and in most cases, this is likely to include consultancy from an external benefits provider who can offer specialist support. This legislation is highly complex, and there is also another overriding factor that teams must have at the forefront of their minds – the challenge of administering and managing the changes. For organisations without the right technology in place to implement and manage the changes the new legislation demands, the physical delivery mechanism needs careful consideration.

There are a number of basic building blocks an employer must put in place to prepare for auto-enrolment. Initially, it should work with its benefits consultant to assess which employees are eligible for enrolment; this will ensure an accurate set of data at the start of the process. Once the parameters of the changes have been scoped, employers must establish their staging date, which, depending on the size of company, could be anywhere between October 2012 and July 2013 (for smaller organisations the Government is changing the staging dates during 2012). Having ascertained the staging date employers need to work out exactly what they are going to pay into the pension scheme, thereby allowing them to clearly project their financial liability.

Once the financial planning has been carried out, the next step is to address the delivery mechanism. The obvious place for auto-enrolment to sit is within a robust benefits solution which allows employee preferences to be accessed and controlled via an online portal. A company pension is a valuable benefit that forms part of an employee’s reward package and for this value to be understood employees need to be able to see it in this context.

Key factors in effectively managing auto-enrolment include integration with payroll, HR systems and dovetailing with everyday processes, and those employers who think they can administer and manage auto-enrolment via a bolt-on payroll or pensions only product could quickly become unstuck.


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