Managers working across hospitality and catering will have heard of the new laws requiring employers – including hospitality employers – to enrol eligible job holders into a workplace pension scheme that meets the requirements of the legislation.
Unfortunately, not all employers have started to take the necessary steps to comply with this legislation. Here, H&C News is pleased to welcome guidance and insight from Steve Watmore, Payroll and Auto Enrolment specialist at Sage UK, who has been helping businesses prepare for the impending changes since the implementation of the Pensions Act 2008.
Ensuring workers have adequate provision for retirement
The Government Pensions Act 2008 brought with it a significant shake up to the pensions guidelines for those in the hospitality sector. Executed in response to a lack of planning for the future by over 7 million workers in the UK, Auto Enrolment aims to ensure that these workers have adequate provision for their retirement. The new laws require employers from all sectors, including those in hospitality, to enrol all eligible job holders into a workplace pension scheme that meets specific conditions set out in the legislation.
Small to large
The ruling applies to every business from small to large and is being rolled out over a six year period, with many of the UK’s largest businesses having already gone through their staging date. So far, the programme has gone some-way to tackle the pensions deficit, having boosted the number of workers enrolled in an occupational pension to over 5.2 million – the equivalent to 59 per cent of all employees!
June marked the start of the enrolment phase for smaller organisations. Whether they employ one person or thirty, now is the time to act. All those within lodging, event planning, catering, and the wider tourism industry must ensure their business is compliant with the Auto Enrolment legislation by the staging date set out by the government. Failure to comply could lead to hefty fines.
A minefield for hospitality?
For organisations within the hospitality sector that have never had a pension scheme implemented, it can seem like a minefield. This sector in particular employs many zero-hour and part-time workers, as well as agency staff, and has the additional complication of seasonal peaks to contend with. Consequently, the industry has been highlighted as one least likely to comply with the new legislation.
In addition to this, smaller organisations in the UK are under increasing pressure to meet legislative developments. For instance, with October 2015 bringing yet another increase to the national minimum wage, many businesses are fearful that they may not be able to offer their staff pay raises and bonuses. This, added to the promise of a 1 per cent contribution to each pension, leaves some of those in the hospitality sector fearful they could be put out of business.
6 step guide to navigate the changes:
With the many legal, financial and administrative implications to consider, Steven Watmore, Payroll and AE specialist at Sage UK, shares his 6 step guide to help the hospitality community navigate the forthcoming changes:
- Make sure you know you staging date
June signalled the start of the roll out for small businesses to comply with the new legislation; organisations should by now be aware of their staging date and have started preparations. It’s important to not underestimate how long the process may take, complications are likely to arise throughout, so it is vital to have time factored in to address these and make the transition as stress free as possible. Firms also need consider the additional time required for administration, as well as for the integration of the payroll into a pension scheme.
- Evaluate your workforce
A formal assessment must be carried out on the workforce in order to determine each individuals’ eligibility for a workplace pension scheme. In order to qualify the employee must be aged between 22 years old and the state pension age, and earn above the £10,000 threshold. Any employee who falls in this category must be put on an Auto Enrolment pension scheme, although employees do of course have the option to ‘opt out’.
- Consider pension provider options
Arguably this is one of the most important steps to consider, get this right and the process should run very smoothly with little complications. Taking the time to research what a scheme is actually offering you, will pay off in the long term. Those organisations who already have a pension scheme in place should not assume that they can use the same scheme for Auto Enrolment, this needs to be verified with the pension provider.
Some businesses within the hospitality sector, particularly small or independent teams, may be concerned that they will have to take uncompetitive rates for their pension scheme due to their business size. By taking some advice from an independent financial advisor (IFA) or an accountant early on, this risk can be reduced.
- Avoid an administrative headache with up-to-date software
Employers can breathe a sigh of relief as there is help at hand for small firms navigating the somewhat complex process. By using the latest payroll software, the administrative process can be simplified. Smaller organisations managing a scheme without a specialist in-house and HR team may struggle to cope with the associated time and cost required for Auto Enrolment.
- Don’t forget, your employees are key
As well as implementing the service, employers are responsible for communicating all changes to their employees. It is important that the workforce understand and are on board with the changes, and are also aware of their rights under the new legislation. As mentioned, all employees that qualify for Auto Enrolment also have the choice to opt-out if they wish, however employers are not permitted to steer their staffs’ decision in any way.
- Plan finances well ahead of time
Along with the administrative financial burden that is likely to occur in preparation for Auto Enrolment, small organisations also need to look at contingencies for a pension fund and the impact this may have long term on cash flow.
As employers are required to make a regular contribution into their staff pension scheme, Auto Enrolment can be expensive for small businesses. As it stands the threshold is 1% of each employee’s annual salary, but this will ramp up to 3% by 2018. Firms need to plan for the foreseeable future and consider the long term effects on their cash flow.
About Steve Watmore, Payroll & AE specialist at Sage UK
As Associate Product Manager at leading payroll software provider, Sage UK, Steven is focused on improving the Sage Product portfolio in line with customer needs and demands. Having supported businesses in transitioning to auto enrolment and navigating its potential challenges, Stephen has a unique understanding of auto enrolment legislation and workplace pensions. Since the implementation of the Pensions Act 2008, helping businesses prepare for the impending changesthrough the use of smart technology has been a focus of his career.
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