Last week I wrote a blog entry about how I believe that Small and medium sized businesses need to start prepare for auto enrolment now.  Today I want to talk about the 3 decisions SME employers need to take to ensure that they start and continue to meet the requirements under the new rules.

It’s important to note that these questions are only designed to provide an overview of the type of decisions as an employer (or an individual with management responsibilities) you may need to make.  When we are talking to employers, our general experience is that many are massively underestimating the impact Auto Enrolment (the upcoming changes in pension rules) will have on their business.

Therefore I don’t want to trivailise the issue they may face by simplifying the decisions that if you as an individual with management responsibilities within an SME may face.

However this blog entry is designed to start you thinking about the approach you might want to take to ensure you and your business are ready for the change in workplace pension rules.

1.  When will these new auto enrolment rules impact my business?

The starting point for most businesses need to be to find out their ‘staging date’ (the date the auto enrolment rules apply to their business)….and then consider how long they need to prepare for the upcoming changes.  You can find out the staging date for your business here.

There are a couple of points which are worth raising here.  When considering your staging date you need to ensure that you based it on the number of employees on the 1st April 2012.

Another particular quirk we’ve found relates in particular to temporary recruitment companies.  Temporary recruitment companies may employ 50 individuals ‘in the office’ but have 200 temporary staff who effectively are paid for (and have contracts of employment with) the recruitment firm, not the employer where they may be temporarily based.

This may mean that, if the 200 temporary staff need to be included as part of their payroll and are counted as ’employees’ of the agency, the companies vesting date may be considerably different to what they had initially assumed and they may therefore have less time to prepare than they originally thought.

2.  How long do I need to prepare?

In our recent experience, most employers are assuming that the preparation for auto enrolment can be done within weeks.

I’d suggest that a business should look at a timescale of 9 months – 1 year prior to their staging date in order to plan and prepare for auto enrolment.

What we’re finding with employers we are currently working with is that there is a severe underestimation on what is required to prepare for the upcoming changes.  When it comes to putting in place a compliant pension scheme this can be done relatively quickly.

However ensuring that an employer has the systems and processes in place to ensure that they meet the pensions regulators reporting rules is a far more significant job which involves a number of factors.

Therefore it’s important to ensure that within your business you give some thought about the time you might need to prepare your business for the upcoming changes.

3.  Do I build systems or outsource?

In many of our businesses when we start any new project we ‘start with the end in mind’.  This is especially pertinent when it comes to putting any plan in place to prepare for the change in pension rules.

We’ve found that many employers assume that preparation for the new rules will require a   one off piece of work.  However ensuring that you and your business complies with these rules is an ongoing piece of work for your business.

Like most business functions many of these ongoing requirements can either be outsourced to a specialist provider or internal systems can be build (and ongoing tasks assigned) to an employee within your business.

This decision needs to be made once you have fully read and understood the guidance notes from the pensions regulator (these can be found here) and this will then allow you to start to plan and prepare your business.