On 6th April, the minimum amount that employers must pay into their employees’ pensions increased to 3% of each individual’s salary.
As a result of this change, many companies have seen their outgoings increase overnight.
Employees’ minimum contributions have increased too, and this could see many workers opting out of the scheme – which would save employers money. However, employers are forbidden from encouraging their staff to opt out and severe consequences can be faced for those who ignore the rules. Offering incentives to workers as a reward for opting out is also banned.
If the changes to workplace pensions are leaving you struggling, there are a few steps you could take:
Only a small number of businesses currently offer a salary sacrifice scheme to employees, yet it’s a perfectly acceptable alternative to more traditional workplace pension schemes in place. In addition, the costs for businesses can be considerably lower without hindering employees’ pension savings. Essentially, workers accept lower pay on the understanding that the reduction is paid into their pension scheme. This reduces the wages on which national insurance is due as an alternative to paying pension contributions out of the income. Employees are no worse off as a result of salary sacrifice.
Shop around for a better pension provider
When auto-enrolment was first introduced, many employers felt overwhelmed by the changes and rushed to find the first pension provider they could – paying very little attention to the actual deals on offer. Now’s a good chance to re-evaluate your scheme and switch to a new one if necessary. Some employers could save thousands of pounds by reviewing their pension arrangements.
Emphasise the benefits of pensions to employees
Although pensions can prove costly, by offering the best one you can afford, you can actually unlock a wealth of business benefits. For example, by emphasising the benefits of your workplace pension to employees, this could be a factor that contributes to an improvement in staff retention and the attraction of talented new staff members. After all, a generous pension could set you ahead of your competitors when it comes to recruitment – slashing recruitment costs in turn.
How to proceed when you can’t pay
If you can’t pay your employees’ pensions, it is important that you seek professional insolvency advice as soon as possible.
There are several options to consider – including Administration and a Creditors’ Voluntary Liquidation (CVL). The right one will depend on your company’s individual circumstances.
To learn more and to gain expert help and support with the process, please get in touch with the team at Clarke Bell today. Our advice is free and confidential.