These are the employers that will need serious help. The majority don’t have a suitable pension scheme in place, many of them don’t have HR departments and they’re probably outsourcing their payroll function.
So guess where – certainly in the first instance – these businesses are going to turn for help? Accountants: are you suitably up-to-speed to meet this challenge?
How well do accountants understand the mechanics of AE? In our experience, they’ve not yet staged themselves and have had little support beyond upgrades of payroll software from providers like Sage in readiness for AE assessments. This has left them in the dark about just how much work their clients will need to do to comply. A clear understanding of the work involved is vital, particularly where the accountant provides payroll services to the client.
The payroll function is fundamental to the AE process since it not only determines eligibility and who must be automatically enrolled, but also deals with the deduction of contributions.
One way of building first-hand experience to share with clients is for accountants to bring forward their own staging date. Gloucester firm Kingscott Dix did just that, moving their date from 2015 to May 2014. Director, Steve Baily explains how much of a difference this has made: “We’ve known for some time that AE is a huge challenge for us and our clients, but simply don’t have the capacity to develop the expertise to deal with it in-house. Having selected an advisory firm to partner with, we brought our staging date forward.
"This has enabled us to test out the service provided by our chosen partner and we’ve been able to see first hand the complexities involved in getting ready for AE. This puts us in a better position to help our clients as we’ll have built on our understanding and we can refer them, with confidence, to an expert partner.”
There’s a big spike in SMEs reaching staging dates in April/July this year (around 29,000 firms), and accountants, advisory firms and pension providers have only limited resources. But this isn’t a once-and-done exercise; another 45,000 firms stage next year, followed by a whopping 447,000 in 2016 and 845,000 in 2017. One of the first things accountants can do is to ensure they have a clear understanding of their clients’ staging dates. This will enable them to plan for the flood of enquiries and to provide assistance accordingly.
There’s been plenty of news coverage highlighting SMEs’ unpreparedness for AE, yet the problem may still be underestimated. Some are leaving as little as one - two months to get ready to stage despite larger businesses confirming that at least six months’ planning is needed to make a good job of it. Worse still, a number of companies have missed their staging dates altogether – leaving themselves open to hefty fines from the Pensions Regulator (and they won’t be tax deductible either!) as well as the requirement to make backdated contributions.
These potential fines, as well as much of the detail of the regulations (contribution rates and definitions, communications requirements and ongoing assessment of the workforce), are not widely understood by SMEs.
As a trusted partner of their clients, the accountancy firm is likely to be the first port of call when the realisation hits that something needs to be done. Many may be inundated with calls for help from clients with some 77,000 employers due to stage between now and the end of 2015.
Roger Pimblett of Bristol independent accountants Whyatt Pakeman Partners speaks of the role required of firms like his: “Accountants should be acting now to understand the challenges facing their clients, to raise awareness of the work involved and provide support or refer to a trusted partner who can help them implement AE. They need to encourage clients to act early, to secure the help they need. If not there is a real danger that clients will be left adrift.”
It’s important to act now, to take the time to understand the regulations, and where you fit into the process. Make sure your clients know when they are due to stage, and that they’re well prepared.
Your ability to guide businesses through this testing time will pay dividends by strengthening your relationships with your clients.
Derek Miles is managing director at Aspira