As we approach the avalanche of firms having to comply with auto enrolment we’re seeing a number of firms coming into the market with brand new auto enrolment software designed to help employers meet their obligations under automatic enrolment.

Whilst many of these pieces of software are well built and designed the individuals selling these solutions might not be best placed to be impartial about their own particular products and where they fit into the market.

I still firmly believe independent middleware has a place in the automatic enrolment market.

However I also believe that we are in a market where employers and the professionals who work with them need to exercise a degree of due diligence around the middleware partners they select.

Here’s the three reasons why…

1. Not all auto enrolment middleware has the same functionality.

Now you’d expect all auto enrolment middleware to do the same job in the same way….right? nope!

There’s a wide range of middleware solutions available (this market, as we approach the hundreds of thousands of smaller employers, seems to be growing) and like any market there is massive difference in the scope and quality of the packages provided.

Some ‘middleware’ is designed to provide a relatively full service, including providing communications to employees, making the required calculations every payment period and helping the employer with much (but not all….more on that later in this blog entry) of the regular automated processes required under the automatic enrolment regime.

Some ‘middleware’ have more features including having the opportunity for employees to receive total reward statements and for employers to provide their teams with additional benefits.

However some ‘middleware’ is designed to be light touch. It’s designed to support certain functionality to support employers with the automatic enrolment process but may fall short in other areas.

For example we’ve seen on occasion ‘middleware’ which does all the fiddly calculations auto enrolment but falls short in other areas (typically on many of the ‘lite’ software we’ve seen the area is can fall short in is communications)

We’ve seen middleware which although marketed as automated and ‘light touch’ needing a lot of manual intervention to work efficiently. This can mean a lot of additional (and unplanned) work for employers and the professionals who work with them.

and

We’ve seen ‘middleware’ which is claimed to have the ability to ‘talk’ to all pension and payroll providers when in actual fact there is a bunch of manual work which is required to translate the information between payroll, pension provider and the ‘middleware’ system.

This brings me onto my next point…

2. For many SME’s the software attached to their existing payroll provider will be an option worth seriously considering.

Consider these two options

First lets consider Option 1

You press a button on your existing payroll software and it exports a file.

This file needs to be checked and the data needs to be formatted to fit into a separate piece of software (“Middleware”) which is designed to certify employers, calculate pension contributions and provide communications.

This process of checking and formatting the data can add a manual stage to the process.

Due to the human involvement in translating the information from payroll to middleware and back again sometimes systems reject data and a checking and data hygiene process needs to occur.

This process of error finding and correction adds another manual stage to the process.

This data then needs to be re-formatted (again another potentially manual stage), error checked (another potentially manual stage), and imported back into the payroll system to be processed.

Now let’s look at option 2

You (or your client) presses a button on their existing payroll software and not only does it process payroll but also completes much of what standalone middleware software can do, including communicate to the workforce, certify employers and calculate (and process) pension contributions.

As the data it uses has already been put into the payroll system there is no need for manual intervention, no need for as much error checking and although none of the automatic enrolment payroll systems still mean that there are outstanding tasks that an employer needs to comply with (more on that in my next point) the process contains less importing and exporting and less manual intervention points where stuff can do wrong.

What option sounds better to you?

Unless you particularly masochistic (and although I’m not suggesting you are…if you’ve made it this far through this article some of you might be!), option 2 is obviously better.

Less admin, less manual intervention, less ‘flash points’ where data can cause an issue, and less hassle.

After all, why put a separate piece of middleware software in place when for a lot of employers their payroll provider (including big payroll providers like Sage and Iris) already has a plug in to do the job?

As I’ve already said there is still a potential market for independent middleware. Some payroll providers are still in a position where they aren’t at a stage where they’ve got a ‘plug in’ auto enrolment solution for their employers and a few employers don’t use bespoke software to manage their payroll at all!

However as payroll providers wake up to the fact that building a “plug in” as opposed to using a standalone piece of software might be the easiest route forward and employers realise that a smarter way to manage payroll and auto enrolment might be a system designed to do both I’ve got a feeling that many professionals and employers might reconsider how they manage auto enrolment in their businesses.

So, if you’re an employer reading this, consider asking your payroll provider to see whether the solution they can provide can make your life easier before looking at alternative options.

Whilst it’s obviously important that the software developed by the payroll provider does the job it might be a lower cost, lower hassle alternative than selecting an independent middleware provider

The same goes for those companies advising businesses on how to comply with automatic enrolment in this market.

Whilst an independent piece of software might purport to take the hassle off your desk it’s important you dig deep enough into what the software does to ensure that, due to having to translate data back and forth, it won’t have the opposite effect.

However regardless of what ‘middleware’ you use, either linked to a payroll provider or independent, it’s important to remember something…

No current middleware does all the tasks required to ensure an employer complies with automatic enrolment.

Which brings me onto my third point…

3. Using middleware doesn’t mean employers automatically comply with automatic enrolment.

Regardless of what automatic enrolment software you use (assuming of course you use any at all) there will be ‘gaps’ in what traditional stand alone middleware or plugins provided via payroll will do.

These gaps include ways to effectively provide your workforce with guidance (which most employers don’t want to do), project management tools and much much more (you can read about the additional gaps in my recently written white paper)

As employers (or professionals who work with employers) the key factor is finding a solution which can deliver not only the software and the pension but also the bits in the gap.

So, although I’ve thought that on the whole there are many conventional middleware providers already in the market we wanted to launch a solution designed not to compete but instead design a solution ready to fill some of the gaps in the automatic enrolment process, and especially for SME and micro employers.

You can find details of the solution we’ve developed over at www.aeinabox.com

I look forward to hearing your thoughts.