Pension auto-enrolment could result in reduced pay for staff, say employers

4th April 2013

Almost one-in-five employers have indicated that the new employer automatic enrolment duties, which came into effect for larger companies in October 2012, could lead to reduced salaries or no future pay rises.
 
A recent report from the Chartered Institute of Payroll Professionals (CIPP) has found that 18 per cent of employers surveyed feel the financial implications of automatic pension enrolment on their business will mean reduced remuneration or no pay rises for workforces.
 
This is an increase over the last 12 months with just 15 per cent of employers surveyed in 2012 believing automatic enrolment would result in reduced remuneration or pay rises for the foreseeable future.
 
More than 70 per cent of respondents to the survey have been forced to consider the financial implications of automatic enrolment on their business – a 10 per cent increase on last year’s figure.
 
Additionally, there is a five per cent year-on-year increase in those who admit they may potentially be forced to reduce their workforce as a result of pension auto-enrolment.
 
Awareness of the pensions automatic enrolment legislation has certainly risen, with all respondents involved in this year’s survey conscious of the scheme compared to just 33 per cent of respondents in 2012.
 
Karen Thomson, associate director of policy, research and strategic visibility at the CIPP, said: "Businesses that are still awaiting their automatic enrolment staging date have a lot to learn from the larger employers that have already gone through the process.
 
"What our research over the last two year has demonstrated is that there are potential financial implications for organisations that do not plan accordingly.
 
"We encourage employers that have yet to fulfil their automatic enrolment duties to ensure that it is at the top of their business agenda and to consult their payroll department and/or software provider as early as possible."
 
The smallest business will not be affected by the legislation until 2017 at the earliest, in order to give business owners adequate time to prepare.

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