2016 is the year that, more than half a million small employers (those with fewer than 50 staff) will be affected by the workplace pension auto enrollment scheme.

Auto-enrollment is the name given to the law which requires employers to automatically sign their staff up to a workplace pension. This came into effect in 2012, but until now has only been applicable to larger companies. By law, all small business employers will have to automatically enroll their eligible employees into a workplace pension and make monthly contributions to that pension.

If you fail to comply to the new guidelines, you could be fined an initial £400 and then - depending on the number of employees you have - you could face additional fines every day until the situation is resolved, with the worst case scenario being that you could end up in court.

Number of employees     Daily fine

50 - 249                              £2,500

5 - 49                                  £500

1 - 4                                    £50

The staging date is when you are affected by this. Larger companies with 250 or more employees have already passed their staging dates to comply. To find out your staging date you will need your PAYE reference to hand, the last two digits of your PAYE reference will determine your staging date. For more information on staging dates click here.

Leaving auto enrollment to the last minute will inevitably result in increased administrative pressure and unnecessary stress. The simple truth is the longer businesses allow themselves to implement the changes, the easier the process will be. The key to this is early preparation, it is crucial to meet the deadlines and save your business paying an unnecessary penalty fine.

We’ve put together a 5-step survival guide to help you get your small business pension-ready.

#1 Plan ahead and prepare

The Pensions Regulator recommends employers begin to plan for the pension contribution 18 months in advance of their set staging date. If you haven’t already acted on your workplace pension yet, you have sadly missed out on having the recommended 18 months to plan in advance. Leaving auto enrolment to the last minute will only cause stress and puts your company in risk of fines. Try to get as much information collated as you can ahead on your staging date, if you are struggling to do so, speak to your accountant or a specialist pension advisor.

#2 Budget and adapt for auto enrollment costings

The cost of planning, payroll modifications, implementation, assessment, communications and record keeping will largely depend on the decisions an employer makes regarding suppliers, providers and their current pricing structures. Employers may also want to seek external advice so will need to budget for this, your accountant should be able to advise you on how you can cover the extra costs incurred by the pension contribution. Many businesses have had to increase their pricings order to cover the pension contribution costs.

Initially, contribution levels are set relatively low but by 2019, employers must pay a minimum contribution of 3% of qualifying earnings per employee into a pension scheme.

#3 Choose your scheme carefully

Employers should take the time to consider their pension provider carefully. The decision they make will have lasting consequences for their workforce and should not be done on a whim. For employers completely new to pensions, we recommend that you seek guidance from an expert pension adviser or your accountant as they will be the best people to point you in the right direction.

Good quality schemes should be able to clearly demonstrate their quality through third party assessments such as The Pension Regulator’s master trust assurance framework or the Pension Quality Mark, these are designed to highlight schemes that are well operated with low charges and good member communications.

#4 Think about your contribution structure

The reality is the auto enrolment minimum contributions won’t be enough for most people to live comfortably in retirement. However, independent research suggests nearly 30 percent of businesses plan to contribute more than the auto enrolment minimum when they enrol their employees into a workplace pension.

Over 57% of those surveyed who intend to pay more than the minimum contribution say they believe it will help with the future recruitment and retention of employees. In order to offer such an incentive you may need to rethink your pricing/costings to make this affordable.

#5 Invest in a payroll system

For auto enrolment and the pension contributions to run as smoothly as possible, your payroll system needs to have an automated data exchange with your pension system. Experience tells us that employers supported by payroll software e.g Sage are significantly better prepared for auto enrolment than those that are managing payroll alone.

Making your payroll more professional ahead of introducing auto enrolment will help in making the scheme a lot less stressful and the additional benefits shouldn’t be underestimated. One of the biggest setbacks for all firms tackling auto enrolment is ensuring all payroll data is complete and up to date because a missing date of birth or national insurance number can cause untold problems further down the line.

We hope this has been helpful in tackling the auto enrolment workplace pension scheme for further help see the sites listed below. Good luck!