Member Article

Employer pension contribution spend set to outweigh pension auto-enrolment costs

Leading software provider, Advanced Business Solutions (Advanced) is advising businesses that the cost of making contributions to employee pension plans will significantly outweigh the cost of implementing the new pensions auto-enrolment (PAE) scheme.

Research by the Centre for Economic Business Research (CEBR) predicts that businesses employing around 100 staff will spend in the region of £12,600 implementing the PAE scheme and that regional labour costs could push that figure much higher. Large firms in the South-East could pay as much as £23,300 for one off set-up costs.

Advanced has advised that in addition to these initial implementation costs, businesses need to be mindful of the impact that contributing to employee pension plans will have on their cash-flow. Businesses will also need to begin planning and budgeting for this as soon as possible.

Simon Fowler, Managing Director of Advanced Business Solutions, said: “Many businesses are going to be impacted by PAE scheme set-up costs but these costs will be minimal compared to the contributions themselves. For example, an organisation with a staging date of October 1 2013, which has 800 employees who are not in an existing pension scheme, could face pension contributions of almost one and a half million pounds in 2020. That’s assuming take-up of just 25%– equivalent to 200 staff opting in – and an average salary of *£20k per employee.”

“I would advise businesses to start planning exactly how they are going to fund this kind of spend, and worry less about much smaller one off costs. How should businesses be budgeting and forecasting for these costs? How many have salary review and planning solutions in place? Many are still relying only on spreadsheets to forecast costs which are prone to error.” continued Fowler.

Advanced has included a comprehensive PAE solution within its payroll software, OpenPeople. This enables customers to process PAE, integrate with document management software and enables the preparation of automated communications.

Business are required to retain all PAE related communications for eight years and the electronic storage of employee communications reduces the administrative burden and high costs related to maintaining a physical archive of hard-copy documents. In addition, the Advanced budgeting & forecasting tool can be used for salary review and pension planning.

To make life even easier for businesses, Advanced has made available a PAE budget calculator, to help work out exactly what their contribution and set up costs will be. This enables firms to forecast future outlay costs and allows them to experiment with multiple staffing scenarios.

PAE, introduced to reform workplace pension provision, is early in to a phased roll out, with the largest employers first. Smaller firms employing less than 500 staff will begin next spring.

Businesses can access Advanced’s PAE calculator, guidance on auto-enrolment, staging dates and contribution costs at:www.advancedcomputersoftware.com/autoenrol/

*Office for National Statistics records £23,244 as the national average salary, 2013.

This was posted in Bdaily's Members' News section by Advanced .