The Introduction of Auto Enrolment leads to increased demand for payroll outsource services
There are many reasons why outsourcing company payroll operations can benefit a business, but the arrival of complicated legal obligations such as Auto enrolment in the form of workplace pension reform may well be what decides the issue conclusively for many employers.
With the threat of fines of up to £10,000 per day imposed by the Pension Regulator, employers are realizing that non-compliance is not really an option! The introduction of Auto-Enrolment has been well advertised in the UK featuring TV stars such as “Dragon” Theo Paphitis and The Apprentice’s Karen Brady. The Department of Work and Pensions (DWP) have spent more that £6m to ensure the British public and employers are aware of the new pension reform.
With the introduction of Auto Enrolment, SME’s will soon be required to contribute an initial minimum 1% employer contribution and enroll their eligible workforce into a pension scheme. Applying the legislation can be complex which prompts many organization to consider the additional benefits of outsourcing the payroll function to professionals who can ensure that their obligations are met in a cost-effective, compliant and efficient manner. Many employers recognize that the cost of outsourcing the payroll greatly offsets the costs of trying to ensure ever-changing compliance requirements in-house.
The traditional benefits of economies of scale still apply to those who choose outsourcing with estimated typical cost savings averaging 15% across a range of sectors. However, it’s really important that businesses consider the reasons for outsourcing. Continuing changes to calculations and legislative issues are certainly a factor as the onus of meeting these requirements lies with those professionals who are most familiar with the particular issues. However, confidentiality, data protection, fraud, availability of human and IT resources, flexibility, expertise and experience are also factors considered by many companies during their decision making process. It’s imperative to find the right fit between the company and the provider. Speak to a few providers about the areas of most concern to your business before making your decision. Trusting your payroll to an external provider is a big decision – it’s important to choose the right one.
When it comes to Auto Enrolment, having a payroll provider won’t excuse any company from responsibility for non-compliance but the requirements but having the right provider assisting will certainly make it easier to comply. Understanding the implications for an “entitled worker” and “eligible worker” are typical examples of the jargon facing employers so having a suitable payroll provider there to guide and assist can be extremely beneficial. While much discussion and debate has questioned the best approach, it appears that the most sensible place to do the necessary auto-enrolment assessment is to do it with the payroll to know immediately if staff are eligible or not.