• Impact of complex auto-enrolment requirements caught Norwegian companies unaware
• Main issues were around ongoing data management
• New Norway-originated data management solution will help companies in the UK
The UK is about to experience the same painful auto-enrolment process as Norway, when it introduced mandatory pensions under OTP (Obligatorisk TjenestePensjon) in 2006/7. Mercer, who supported local Norwegian companies through the process, has warned that the lessons of Norway have yet to be learnt.
Under UK auto-enrolment, it is expected that around 5 million employees will enter pension schemes for the first time, with some schemes doubling or tripling their membership numbers.
Rich Tuff, Auto-enrolment Relationship Manager in Mercer’s Outsourcing business, said: “It’s tempting for most companies to leave all the preparation work till the last minute, but Norway’s experience of doing so was certainly painful – for employers and providers.
“One of the unintended consequences of Norway’s legislation was the extreme complexity of the auto-enrolment requirements, and the UK’s regulations will have a similar effect.
“The main administrative challenge will be to categorise and track employees on a continuous basis, to ‘catch’ them when they became eligible for auto-enrolment. Many employers believe auto-enrolment is a one-off exercise, but it’s much more complex than that,” Mr Tuff added.
In order to enrol their workforce, UK companies must categorise their employees into entitled, eligible and non-eligible workers. Each category has different criteria and entitlements to track, so that even the most sophisticated payroll systems will need to be changed in order to map these over time. Additionally, these systems will need to establish opt-out flags to re-enrol employees after three years if they have opted out.
One of the other challenges will be to deal with the administration of “exceptional” cases – ranging from expats workers with two addresses to employees with complicated working patterns.
“To manage the auto-enrolment process on a continuous basis, companies will need an efficient process for identifying and coordinating data between their various HR, payroll and pension providers. In Norway, we designed a highly successful data management tool and support service for aggregating this data, to make the process smooth and automatic,” said Mr Tuff.
Mercer’s innovative “data care solution” helps companies solve the challenge of the month-on-month process of enrolment and collation of data. As well as being a straight through processor, it aggregates data, manages exceptions and performs data quality checks and corrections. A key feature is that it needs minimal adaptation to clients’ existing HR systems.
Hallvard Müller, a Principal in Mercer’s Oslo office, commented: ““In Norway, many employers believed that the enrolment process, once set up, would run on auto pilot, with multiple data files being automatically processed into opt-in and opt-out straight through files. The experience was anything but that.
“Our legislation caused great confusion as it told companies what to do, but not how to do it. Many providers built free data portals but relied on simple rules and automation, and failed to take account of data quality at source,” he added.
In Norway, companies also found the transfer of data problematic, as there were often no common standards between functions and the systems they used. File formats were a particular issue, with different providers asking for different formats and file types across payroll and other functions.
“Our experience was that employers must attend to data quality at the outset, ensuring data is accurate, complete and owned within the organisation. Thereafter, they will benefit from using a data hub that can collate and track rules and data to manage the auto-enrolment process on a continual basis,” Mr Müller added.
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