Auto-enrolment is a difficult challenge for any employer, but particularly for organisations with weekly-paid employees, who present additional complexities.
Staging dates always fall on the first of the month, which will often be in the middle of an employer’s pay reference period for weekly-paid employees. Employers can consider using postponement to align the date at which they auto-enrol employees with the start of a pay reference period to avoid part-period calculations.
Another issue for employers is that pay reference periods (PRPs) can often start and end on different days within a week for groups of employees, so organisations should ensure they are aware of all employees’ PRPs so that they comply with auto-enrolment guidelines.
Technical changes to areas such as PRPs are expected to be in place soon following the Department for Work and Pensions’ publication of responses to its Technical changes to automatic enrolment, public consultation on draft regulations and other proposed changes, published in March 2013. This should provide additional flexibility and easements for employers, but it is still likely to be a complex problem to solve.
Timescales for processing and communication are inevitably small for weekly pay cycles, especially where there is a significant amount of variable pay. The scope for employers to use postponement to buy themselves extra time within their pay cycle is also limited for weekly-paid workers.
As a result, about 80% of the employers I deal with use simple postponement and rely on their payroll system to carry out their assessments rather than a third-party system.
There are also the opt-out and refund of contributions processes for employers to consider, which may require an aggregation and reconciliation of multiple weekly amounts. Add in the complexity of salary sacrifice, where appropriate, and this can be a difficult process for organisations to get right, and a challenging one for them to communicate.
Some employers are using auto-enrolment as a catalyst to move away from weekly pay cycles. Organisations for which this is not feasible or desirable should not underestimate the amount of work involved in getting their processes, systems and communications right.
Lawrence Sutton is senior manager at emxsolutions, People Services, Tax and Pensions at KPMG