Last month I looked at the potential impact on small businesses of the introduction next year of the National Living Wage. But there is another piece of government legislation running alongside it that is likely to have a significant effect on the small business sector – pensions auto-enrolment.

Unlike the Living Wage, where there is a fixed start date of April 2016, auto-enrolment comes in at different times, depending firstly on the size of your business and secondly on your PAYE reference. All large and most medium-sized businesses have staged (as they call enrolling into the scheme) already. For the majority of small businesses their staging date will arrive in either 2016 or 2017.

Contributions for employers and employees alike
Official figures suggest that 1.8 million businesses, employing over 5 million people, will register during the next two years – around 500,000 more than the Pensions Regulator first estimated, due to an increase in the number of new businesses and a reduction in the anticipated number of failures.

Auto-enrolment means contributions for both employers and employees alike. There is a minimum stake for the employee, which has to be at least matched by the employer, which increases over the three years following your staging date. Although employees can opt out, they are positively encouraged not to do so. For bosses, there is not only the pension contributions to factor into their budgets, but there is the cost of scheme administration and higher payroll processing charges.

Employers should prepare now
If you are an employee, particularly if you do not already have a workplace pension, and your company has not yet mentioned this issue to you, ask your manager about it.

If you are an employer with more than just you and your immediate family on the payroll, and you haven’t been involved in preparing for auto-enrolment yet, you have little time to lose. Look at the Pensions Regulator’s website for guidance; establish when your staging date is; check your payroll software can cope with these legislation changes; work out how much it is going to cost you. Talk to your accountant and/or Independent Financial Adviser (IFA) – we’ll know all about it as it’s quickly become a regular feature of all our daily lives.