Small companies says automatic enrolment pensions will damage growth

Extending automatic enrolment (AE) into workplace pensions to companies with less than 50 staff is likely to prove challenging for the UK’s smallest businesses, with some of the smallest companies claiming that they will be unable to offer staff pay rises as a result and some fearing they will go out of business, according to research by AE provider, Enrolsme


A poll of 200 employers and 50 charities in businesses employing 1-50 people with no pension in place  found that over a third (37%)  said pay rises or bonuses would  be affected as  result of the new requirements, and a quarter (26%) said they would not be able to take on more staff.

Among the smallest companies, 43% of those employing 1-5 staff said they are fearful of not being able to offer their staff pay rises and bonuses once they introduce automatic enrolment. 

In addition, 21% of companies with 1-5 employees said that automatic enrolment could even put them out of business.  Over a third (36%) of businesses in this category claim they would need to increase the cost of their services to accommodate automatic enrolment; another 48% are still unsure.

The survey also polled 250 staff in small companies and found  72% of employees who work in companies with less than 50 staff are concerned that their future pay rises may be affected as a result of putting in place a workplace pension.

Matthew Mitten, director of Enrolsme, said: ‘These are worrying trends, given small businesses are the lifeblood of the economy. Employment in this sector may be affected with a third claiming they won’t be able to recruit more staff; and almost one fifth telling us they will have to reduce their investment plans.’

The survey also highlighted that 31% of employers still do not know what automatic enrolment is, increasing to 37% in companies with five to 10 staff.

Mitten said: ‘The Pensions Regulator (TPR) does seem to be attempting to do more to raise the profile of automatic enrolment and workplace pensions through a media campaign.

'But given the fact that around 1.5m businesses are yet to comply, I still find the lack of awareness at this current time a concern. Businesses really need to see the value of automatic enrolment.’

Of the 69% of businesses that were aware of automatic enrolment, 70% didn't know when their staging date was, increasing to 79% for those employing one to five staff.

Overall, 11% of the businesses surveyed stated they would not plan their AE staging until the very last minute. Enrolsme calculates that with 1.5m businesses due to stage before the end of 2018, this would equate to approximately 165,000 companies.

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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