Since auto-enrolment was rolled out in the UK in 2012, it’s becoming a hot topic for Irish businesses too – while we wait to find out if and when it’s likely to be introduced here, or not.
We take a closer look at how it could impact you if it is implemented – and what you should do, to soften the blow!
No neutral ground
Auto-enrolment has plenty of pros – and cons – it’s certainly not a topic you are likely to find neutral ground on, if you’re a business owner.
But did you know that less than half of employees in Ireland have a pension scheme?
It’s a concerning, but unsurprising statistic. Like a lot of other countries, employees in the private sector in Ireland have relatively low pension coverage and this is an attitude that has had businesses like Thesaurus call for a dramatic change on the savings horizon.
They’re pretty certain that putting a legal obligation on employers to enrol employees into pension schemes is the only way to tackle the looming pension problem.
What’s the likely impact?
So how could it impact you and your employees? Taking a look at how it has been implemented in the UK, as described in detail on the Public Policy blog, gives you quite a useful insight into what you could expect.
As a quick overview – it means that all employees must be offered a workplace pension scheme. While it would be completely compulsory on employers to offer it, employees themselves may have the choice to opt-out by filling in a form. But this is something they will need to do every few years – as employers will have to keep re-enrolling them!
There will be a minimum contribution for both employers and employees – currently at 3% and 4% respectively in the UK. While these contributions are gradually being phased in, this can translate to quite a sizeable amount of Euros – so is it possible to soften the blow?
Easing the impact
Auto-enrolment is, by definition, automatic for employees. But as the UK’s Pensions Regulator helpfully points out, it is not automatic for businesses, and it will take some time for you to prepare and ensure all eligible staff are correctly enrolled.
Thankfully, this is not something you would be expected to do overnight – they suggest a realistic timeframe of 12 months. In this time, you would need to make sure that any existing pension schemes you have in place are suitable for auto-enrolment, and that you’re fully compliant with all your duties. If it is introduced in Ireland, then auto-enrolment is most likely to see a phased rollout, which may allow a reasonable amount of time to adapt to it.
The biggest concern will be the minimum contributions required, from both employer and employee. To ease the transition, we could expect a gradual increase in percentages over a period, as has been the case in the UK. And as Real Business points out, this can offer employees quite an attractive deal, as their pension pot will soon start to grow.
But even with a transition period, this could still raise potential challenges for employers – so it’s important to consider a couple more issues that could soften the blow for you.
Firstly – find a suitable workplace pension scheme for you. You’ll need to ensure they are fully compliant with all legislation, but this can take a lot of the work out of the move for you, leaving you free to focus on your business.
Next – establish a clear plan and timetable. There will be a lot of key dates to note along the transition period, so it’s vital to make sure that you have reached each step along the way in a timely fashion. The last thing you want is to be caught out unawares!
What are your thoughts on the prospect of auto-enrolment in Ireland?
Let us know what you think!