The auto-enrolment pension scheme will cost SMEs and umbrella companies an average of £2,550, but the true cost of administering it could be horrendous, warns the FSB.
As from 2017, all businesses will be required to pay 3% of each employee’s salary into a pension fund. So, the cost for a company with four employees, all earning £25,500, would be £2,550.
The FSB’s policy chairman, Mike Cherry, said that whilst it is imperative that everyone gets a chance to save for their retirement, the automatic enrolment scheme is going to be very costly for the smallest businesses.
The coalition has implemented measures to make it easier for micro firms to comply with the enrolment procedures, but it will still cost these small firms a minimum of £2,550 each year to make the pensions contributions.
According to the government, it will cost £46 per employee for a micro firm to administer the scheme. The FSB on the other hand believes it will cost much more and has called on the government to publish an impact assessment as soon as possible. The Federation wanted the government to exempt micro firms completely from the pensions legislation and it is now concerned that the Pensions Regulator will come down hard on the smallest businesses.
Contractors who work through their own limited company will not have to join the state run pension scheme. Umbrella companies on the other hand will have to, but contractors employed by them will have the option of opting out. Umbrellas will have until August 2014 to implement a scheme for their contractor clients.
© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.
Image: Mouthful of pain by wstryder
