Auto enrolment ten months on – top 3 lessons learned + top 3 tips for employers yet to stage from Ceridian
Opt-out rates below Government expectations
Ten months on from the first staging date of pension auto enrolment, Ceridian, one of the UK’s leading HCM technology and service providers, claims there are three important lessons to be learned and provides three top tips for those employers yet to stage.
Melissa Goddard, director of pensions solutions at Ceridian UK, said, “The complexity of the pension reform legislation has definitely been a challenge for employers, as far as compliance is concerned. It has also had the knock-on effect of being a longer, costlier and more complicated process to get right. Allowing extra time – 12 months minimum – to meet your staging date is increasingly necessary and effective communication to secure employee engagement is critical to success.”
Below are Melissa’s top three lessons learned and top three tips.
Top 3 lessons learned:
1. Complexity of legislation places real time and resource pressures on payroll
“The devil is definitely in the detail and certain aspects of the guidance over-complicate how employers need to implement changes in practice, particularly pay reference periods and proration requirements.”
2. Underestimating systems integration issues
“Solving the problem of achieving joined up end-to-end processes takes a lot of time and effort and is often overlooked by employers during their planning and budgeting.”
3. Opt-out rates lower than Government predictions
“The lowest opt-out rate we have seen among customers is four per cent and the highest 15 per cent.”
Top 3 tips for employers yet to stage:
1. Plan early – a minimum of 12 months ahead
“If organisations want to secure their first choice of suppliers and external resources, they ideally need to allow closer to eighteen months, especially as we move into the higher numbers of employers all needing support at the same time.”
2. Make payroll central to ensure auto enrolment compliance
“Our experience is that where customers have chosen our award-winning pensions module that is totally integrated with our payroll solutions, integration, complexity and timing challenges are significantly reduced.”
3. Communicate early and clearly to engage employees
“Successful employers are using the change in legislation as a means of engaging with their employees and helping them understand the wider benefits of saving for their future.”
Below Melissa provides expanded commentary on the top three lessons learned and top three tips.
Top 3 lessons learned – detail
1. Complexity of legislation places real time and resource pressures on payroll
“The complexity of the legislation has had an impact on payroll, as ‘pay reference periods’ are used for assessing auto-enrolment duties. These periods do not conform to the operation of tax or National Insurance Contributions (NICs). This places real time and resource pressures on payroll departments, especially in cases of variable paid employees, as assessment is against actual pay and deduction of auto enrolment contributions needs to be done in time for the live payroll processing.
“The devil is definitely in the detail and certain aspects of the guidance over-complicate how employers need to implement changes in practice, particularly pay reference periods and proration requirements. We have been lobbying for an alignment of pay reference periods with the tax period and removal of the proration requirements.”
2. Underestimating systems integration issues
“A specific challenge for employers is joining up the various disparate systems that historically have not previously needed to talk to one another, with the added requirement of legally prescribed time limits. Each system has its own data standards which do not match the next. Solving the problem of achieving joined up end-to-end processes takes a lot of time and effort and is often overlooked by employers during their planning and budgeting.
“Many employers under-estimated the work involved in ensuring compliance and the extra costs involved in terms of additional headcount or alternative technology and the systems integration costs. Recent reports highlighted one organisation that estimated integrating the various elements of its auto enrolment solution using a hub approach cost more than its first year’s contributions!”
3. Opt-out rates lower than Government predictions
“Our experience on opt-out rates so far is that they are lower than the Government predicted rates, based on experiences in other countries. Asda, Britain’s second largest grocery retailer with 175,000 colleagues has seen rates averaging eight per cent following strong engagement and communications across its business. The lowest opt-out rate we have seen among customers is four per cent and the highest 15 per cent.
“However, a couple of key triggers may change the shape of continued employee membership in workplace savings. Firstly, opt-outs are focused only on the first 30 days after enrolment, which might not be long enough for employees to register a regular deduction from pay. Looking at opt-out rates two or three months after the opt-out window has closed may show a rise in scheme leavers. Secondly, the trigger point to leave might be when employees see their first annual pensions statement and realise the value fund they have accrued is smaller than they expected. This will apply particularly to those employees in low paid jobs.”
Top 3 tips for employers yet to stage – detail
1. Plan early – a minimum of 12 months ahead
“Those employers who have yet to stage need to begin planning and budgeting at least 12 months ahead of their staging date. And if organisations want to secure their first choice of suppliers and external resources, they ideally need to allow closer to eighteen months, especially as we move into the higher numbers of employers all needing support at the same time. Employers should not underestimate the amount of time required to validate existing and new operating processes and procedures to ensure auto enrolment compliance. The later staging of SMEs, many of whom have not yet properly planned for auto enrolment, is already placing huge strain on providers. We would encourage early engagement with providers to secure the right resources at the right time.”
2. Make payroll central to ensure auto enrolment compliance
“Our experience is that where customers have chosen our award-winning pensions module that is totally integrated with our payroll solutions, integration, complexity and timing challenges are significantly reduced. We have had a number of customers come back to us for help after choosing a solution where assessment is not done in payroll as, after detailed analysis, they realised it would not work to be compliant.”
3. Communicate early and clearly to engage employees
“The most successful customers who have staged are those who placed major emphasis on employee engagement with clear, simple communication. The volume of calls has been lower than anticipated, and we have even seen employees choosing to opt-in early, even ahead of a staging date. Successful employers are using the change in legislation as a means of engaging with their employees and helping them understand the wider benefits of saving for their future.”
For further press information on Ceridian, contact either Chief Commercial Officer, Nick Laird on 0118 922 3606 or Jeremy Snook at JSPR on 01235 227572. Mobile: 07957 867139. E-mail: jeremy.snook@jspr.co.uk
Notes to Editors:
Ceridian
Ceridian is one of the world’s leading HCM technology and service providers. In the UK, it works with over 5,000 businesses, large and small, delivering quality, accurate payroll and value-added HR services.
Ceridian provides national and international payroll and HR transactional services including HR outsourcing, employee benefits, workforce management, expense management, absence management and employee assistance programmes.
Innovative Software-as-a-Service (SaaS) solutions are offered to all clients. These leading-edge SaaS solutions can be purchased as a complete totally-integrated package, or in scalable modules, designed to flex with organisational needs.
Through decades of global experience, people capability and first class delivery of world class HR transactional solutions, Ceridian increases quality, reduces risk, boosts revenue, lowers cost and frees time for its customers to focus on their priorities.
From multi-nationals to small start-ups, Ceridian’s KnowHow enables their HR development journey.
Ceridian is winner of the Payroll Provider Award, Payroll Software Product Award and Technology Development Award in the 2012 Payroll World Awards.
For more information, visit www.ceridian.co.uk
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