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Employee Benets AE November 2011 We all want to know what our future holds, but when it comes to compliance,

accuracy is always preferable. So how do employers try to assess the levels of opt-out from auto enrolment (AE)? The beginning Firstly, determine the strategic corporate position. How many employees? How much might this increase the pension contributions? How will it t inside the existing benet structure? Can it be made to t or do you need a new pension plan? How much can you afford to do? Budgeting for the cost of the auto enrolment process is an important consideration. In truth, all these questions should be asked during a full assessment of the requirements for any implementation project, says Rachel Brougham, principal and head of auto enrolment at Mercer. The wholesale review of benets should start at least 18 months ahead of the staging date as there is a point when employers can no longer keep themselves out of jail. The niceties cant be timetabled, This needs to be done to ensure you are compliant. That said, there are certain rules of thumb that can provide an indication of opt-out rates. Having a thorough understanding of the of the demographics of the workforce will give you a strong indication. The middle: demographics and communication There are likely to be higher opt out rates in the retail and manufacturing sectors. The reason for this is quite simple; the closer you get to the minimum wage, the more sensitive workers are to changes in take home pay. The next is a function of your existing benet structure. If you already offer generous ancillary benets, auto enrolment opt-out rates are likely to be lower than average. In some organisations, benets may even have to be trimmed so the employer can afford to comply with AE. Communication is an important factor. The more you do or certainly the better you do it the more you will achieve. Decide if that satises the benet strategy. Less may mean more. For others, at least. Finally, and this is something that no employer has any control over, is the general environment AE is delivered into. The efcacy of the DWPs campaign to employees and how the media will represent it will greatly inuence the level of opt-outs. Pensions is a dirty word to many, and if AE is associated with the scandals that have beset nancial services over the past generation, there may be even fewer takers. Preparation is the key So what should employers be doing? Doing nothing is not an option. Every employer has to be compliant for their staging date and although employers with fewer than 500 have until January 2014, this is not an overnight project even then and things change. What is the corporate strategy for growth? Mergers and acquisitions may force your hand. There will be breathing room as the three month grace period will mean employers in sectors with high turnover of staff can avoid enrolling them only for them to move on. Knowing what your opt-out level will be is the $64k question, says Martin Freeman, head of product strategy at JLT Employee Benets, but its not the best way to plan for AE. People tend to miss the point as they believe this is a one-off problem or cost. It isnt. It has to be done every three years and every time someone change jobs. Seeing the big picture
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Employee Benets AE November 2011 Finally, you must realise thisisnt just about pensions. Some of the biggest headaches in the AE projects already undertaken have been around integrating the process with payroll IT. Can your existing providers handle it? Ask them now. If they cant, they may have time to put it right. The DWP predicted a 25% opt out rate, but this was before the recession and may be increased initially as the economic conditions have worsened. Assume a worst case scenario and prepare for it. You have to be AE ready, so do as good a job as you can and it will likely serve you and your employees far, far better. BOX OUT: If you read nothing else, read this! Like it or not, every employer has to be ready for auto enrolment. You cant implement it overnight, so start planning and start early. Whats the corporate strategy? Start here and work out how much you want to achieve and how much you can afford. Know your workforce segment them as if they were customers. Then consider how they may react.Remember, the closer to the minimum wage, the more sensitive workers are to deductions. Communications are important. The more you do, the better auto enrolment succeeds.But how does that t with your strategic position? This is not just about pensions. The success of your project and being able to comply with the regulations depends upon your ability to integrate auto enrolment with your existing benet structure, your culture and most of all, your systems, particularly payroll. Pdraig Floyd ends

2 Pdraig Floyd Friday, 18 November 2011

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