Steve Webb has announced a delay of over a year before auto-enrolment becomes compulsory for small businesses. But what might be good news for some companies is bad news for their employees.
Steve Webb, minister for pensions, has confirmed that automatic enrolment for businesses with over 50 employees will begin in October 2012. However, small businesses (with less than 50 employees) will not have to begin automatically enrolling their staff until May 2015, a delay of just over a year.
Announcing the revised plans Webb commented that, “we recognise that small businesses are operating in tough economic times so we are softening the timetable for implementation to give them some additional breathing space. This is a sensible step that ensures long term pension issues are addressed while meeting the short- and medium-term needs of small business. We are committed to ensuring the employees of these small businesses get the chance to save and that is why no one will miss out".
Good news for some...
John Longworth, director general of the British Chambers of Commerce welcomed the announcements. Longworth commented:
“Pensions auto-enrolment imposes huge costs on business, with the government’s own estimates suggesting it will cost employers over £4.5billion per year. In the current climate, a delay to auto-enrolment for small businesses with fewer than 50 employees is good news.
“However, the changes proposed today will bring new uncertainty to all firms with fewer than 3,000 employees. The vast majority of employers in the UK will be left in a state of confusion. The government must urgently work to deliver certainty to affected companies, and immediately clarify when this latest policy shift will affect them.
“Since smaller businesses will now not be required to auto-enrol their staff in pension schemes until the next Parliament at the earliest, the government has an important window of opportunity to pare back the costs they face when they do join the system.
“In a recent BCC survey, a third of sole traders said that pension requirements were a total or significant barrier to taking on their first staff member. Exempting sole traders from pensions auto-enrolment when they take on their first employees would remove a significant barrier for those business owners looking to expand their business”.
While the announcement may be good news for small businesses, it will mean that employees at these organisations will have to wait even longer before they have the right to receive an employer contribution to their pensions.
...is bad news for others
Brendan Barber, TUC general secretary has referred to the announcement as a “grave disappointment”, arguing that "it is further confirmation that this government sees small-business staff as second-class workplace citizens, not deserving of the same rights as staff in bigger firms. The need for a retirement income does not depend on the size of your employer".
Similarly, Joanne Segars, NAPF chief executive, mirrored this disappointment claiming the government “should have stuck to plan A”.
She continues: “small businesses are absolutely critical to making these reforms work, because their staff are the least likely to have a workplace pension.
“This decision also risks creating competitiveness issues where small firms are competing with larger companies who are going ahead with auto-enrolment.
“Businesses will quite rightly be wondering how much faith they can have in the system, and whether more changes are in the pipeline.
“The government needs to restore some trust in these hugely important changes. The UK simply isn’t saving enough for its old age, and we have to get these reforms right”.
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