Don’t be afraid to nag, says Karen Thomson.
Computer scientist Ralph Merkle once said something like: “If you look at the various strategies available for dealing with a new technology, sticking your head in the sand is not the most plausible.” The same is true of pensions auto-enrolment, but many clients still seem to ignore our communications.
How often have you heard a client say: “This doesn’t apply to me – I know all my staff will opt out”? Or: “I only have three employees.” Or better still: “I haven’t received official notice from the Pensions Regulator.
If you work in or run an accountancy practice, especially if you offer a payroll service (like me), auto-enrolment should be a top priority. Whether you intend to support your clients or not, you should be pushing them to at least acknowledge it.
My practice has run free seminars, supplied leaflets, promoted auto-enrolment via our website and provided links to material from the Pensions Regulator. Our team has confirmed all staging dates and, via a bespoke workflow system, sends out 12-month, nine-month, six-month and three-month reminder letters.
The 12-month letter advises what auto-enrolment is all about and confirms how our payroll service can help. The nine-month letter reminds the client about the 12-month letter. The six-month letter gets a little heavier and says they need to do something. The three-month letter gets even heavier and gives them one month to advise us if they want our help in administering auto-enrolment due to the volume of clients that will need help.
If we get no response after that letter, we assume the client will handle auto-enrolment themselves.
If you find yourself in the latter situation, you should still be aware of what the client must keep in mind. You may be able to relate to clients submitting payroll data on the day the BACS needs to run. If they do this, how are they going to assess the earnings in time to advise payroll when to deduct pension contributions?
Are you able to complete the declaration of compliance for them? If not, you might want to remind the client that they need to do this within five months after their staging date. One of the trickiest issues is what to charge clients.
Don’t underestimate the time involved – it can depend on which pension scheme the client wishes to use. Check with your payroll software provider what pension scheme reporting is already set up. Among the most common will be NEST, Now Pensions and the People’s Pension.
If your payroll system can provide an output report that can be uploaded to the pension provider, there will still be work involved but it will be somewhat automated. Your payroll software might use Pensionsync, which works with various pension providers to effectively communicate, via an encrypted data file, directly with them.
However, where output reports are not set up or your software doesn’t link with Pensionsync (and you don’t either), it can be extremely time-consuming to manipulate the spreadsheet output to match the pension provider’s requirements.
Five steps to prepare for auto-enrolment:
1. Communicate early with your clients about their obligations.
2. If you’re providing a service, supply deadline dates to ensure you don’t end up with a tsunami of set-up requests.
3. Decide on your charging structure. Work out different costs based on a number of pension providers.
4. Find out what your payroll software can do for you.
5. Prepare a client staging date timeline so you know when your peaks might be for processing and your cash flow.
Karen Thomson is director of group payroll services at Armstrong Watson.