Despite it costing £3m for an average company with 7,500 employees* over half don’t know how much it will cost their organisation
Key findings of Hymans Robertson’s research among Finance and HR directors at the UK’s largest employers** include:
Only 17% of UK’s largest employers are confident they know how much auto-enrolment will cost their company overall
-
This is worrying, as it’s less than 18 months to go until the largest employers have to begin automatically enrolling employees into workplace pension schemes
-
The costs for both set up and to pay for extra contributions average at £3m for a company with 7,500 employees*
-
Yet over half don’t know how much it will cost to set up the necessary systems and the extra employee pension contributions
-
From the six months from October 2012, 600 of the UK’s largest organisations, employing about a third of the UK workforce, will need to auto-enrol employees so the unanticipated cost to UK plc is huge
-
Only 55% are confident they will have the budget for both for set up and extra contribution costs
-
This figure is surprisingly high given only 9% know the cost of putting infrastructure in place and only a third know how much the extra contributions will cost their organisation
Research from Hymans Robertson, the independent pensions and benefits consultants, released today has found that the UK’s largest employers do not have a handle on how much automatically enrolling employees into pension schemes, due to begin taking effect in October 2012, will cost their organisations.
The study, which canvassed the views of finance and HR directors at the UK’s largest employers (those with over 5,000 employees), found that only 17% are confident they know how much it will cost their organisation, despite the fact costs will be in the region of £3m for an average large UK employer*.
Commenting on how much it will cost companies, Lee Hollingworth, Head of DC at Hymans Robertson, said:
“To give a scale of the costs of auto enrolment for large employers, for an average company with 7,500 employees*, auto-enrolment is set to cost around £3m for both set-up and extra contributions. The fact that only 17% know how much this will cost their organisation overall is very worrying when we’re talking in these numbers.
“It is particularly alarming when you consider that in the first six months from October 2012, 600 of the largest organisations in the UK, employing about a third of the UK workforce, will need to auto-enrol employees and comply with the regime. The total figure of unanticipated or unplanned costs for UK plc will be enormous.”
Only 55% are confident they will have the budget both for putting in place the necessary systems (including changes to HR, payroll and pensions systems) and paying for the extra cash contributions to new pension scheme members. Almost a third of those surveyed do not think they will be able to find the budget either for set up or contributions. 9% believe they will have the budget for set-up, but not the additional contributions while 5% think they will be able to fund contributions but not the set-up.
Looking at awareness of the actual costs involved, only 9% know the set-up costs (to change HR, payroll and pension systems). 21% roughly know but 70% don’t know. When it comes to the extra contribution costs, two thirds don’t know how much it will cost their organisation, rising to almost three quarters of finance directors.
Commenting on the uncertainty among key decision makers over finding the budget to pay for auto-enrolment, Hollingworth added:
“The fact that this many FDs and HRDs are not confident about finding the budget to pay for auto enrolment in itself is a cause for concern. But we worry that in reality that potentially this number be higher given only 9% know how much it will cost to put in place the necessary infrastructure to comply with the auto enrolment regime. To us this is a clear sign organisations haven’t begun preparing for this yet. And if they don’t know the costs, how can they know if they will have the budget?
“Given most of these employers need to be ready by April 2013, they will need to budget plan by mid-2012 for the extra cash contributions. Even more urgently they should be planning budgets for set-up now ahead of next year. Particularly as the recommended window to get ready for auto enrolment is 18 months.”
The research** was undertaken to test whether the main decision makers at companies in relation to auto-enrolment - Finance Directors (FDs), as they will provide the budget, and Human Resource Directors (HRDs), as they will project manage the implementation - are aware of the scale of the challenge, in terms of the resource and time needed to deploy that resource ahead of the deadlines.
Different companies will be required to be ready at phased deadlines (known as the ‘staging dates’), starting with the largest employers first. It is these organisations that must put auto enrolment preparation higher up the priority list:
Companies with 120,000 employees must be ready by October 2012
Those with 20,000 to 29,999 employees must be ready by February 2013
Those with 6,000 to 9,999 employees must be ready by April 2013
Those with 3,000 to 3,999 employees must be ready by July 2013
And those with 1,250 to 1,999 employees must be ready by September 2013.
|
