Micro entity owners poised to cap salaries to meet auto enrolment costs

Staff at micro entity businesses – employing up to 10 individuals – may be the first to bear the fiscal brunt of implementing auto enrolment, with 34%of micro-business owners saying they will offset the costs of introducing the mandatory scheme and the increased contribution into staff pension pots by capping staff salaries and/or bonuses

Intuit’s research was based on questions to 250 micro entity business owners, since micro entities altogether account for 96% of all UK companies.

Auto-enrolment costs are estimated to be £8,9001 per small business, according to Intuit, yet 40% of the UK’s smallest and most vulnerable businesses either don’t know or don’t think it will cost anything to set up, while a further 11% think it will only cost up to £5,000.

The research also revealed very limited knowledge of Auto-enrolment amongst micro-business owners. Only 33% claimed to be able to accurately describe the legislation and 65% admitted to not knowing their businesses’ staging date. As a result, this prompted 68% to suggest they would be likely to outsource all the processes involved with Auto-enrolment to an accountant.

Of those surveyed, 19% said they would also have to reduce employee benefits and entertainment as a result of implementing the pensions legislation while only 37% said they will take on the costs by using business working capital.

The software company says it takes an average of 103 days to implement per SME, yet 85% of those polled think it will take 50 or less.

In addition, 56% of those surveyed admitted that they would be tempted to encourage staff to opt out of the scheme if they were unlikely to be found out by The Pension Regulator. And 68% would be prepared to miss their staging date, despite the £400 starting fine in place for doing so.

UK vice president and managing director for Intuit, Rich Preece, said that given Auto-enrolment will affect almost every person across the UK in some way, he were surprised to see how many micro-businesses are still unprepared.

‘It is worrisome that these vulnerable businesses may not be taking the necessary steps to ensure their business will not only comply with their initial staging date, but be set up for the on-going impact that workplace pensions will have on their business. It’s important they act now to educate themselves on the issue and put systems in place to manage the tasks ahead,’ said Preece.

Penny Sukhraj |Content editor, Accountancy - (up to 2016)

Penny Sukhraj, former content editor and writer for Accountancy and Accountancy Live, responsible for commissioning and editing news...

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