Pension deadline nears for 800,000 small companies

THE number of small firms to auto enrol employees in a pension is set to more than double in 2017 as the engine room of the economy faces a deluge of extra costs and uncertainty in 2017.

An estimated 800,000 small businesses are set to reach their autoenrolment staging date in 2017. By contrast, The Pensions Regulator expects a maximum of 374,3000 small employers to have enrolled during the whole of 2016.

In a recent survey by market researcher YouGov for workplace pensions provider Smart Pension, more than half of small and micro businesses felt auto-enrolment would be a burden and two-fifths said it was unfair. But 72 per cent said it would not get in the way of growth plans.

Will Wynne, co-founder and managing director of Smart Pension, said: ‘2017 is going to be a challenging year for hard-working small companies. We know initiatives like auto-enrolment have a disproportionate effect on smaller firms, where the founder is often the boss, the FD, the HR manager, the works supervisor, the first aid officer – and everything in between.’

He said 2017 would be a ‘massive step change,’ when almost a million small firms offer employees an opportunity to save for their retirement for the first time. The Pensions Regulator calculates that 1.46million small firms in total will need to set up pension schemes.

Wynne added: ‘The Government is pushing small business gradually towards digital accounting and payroll products.’ However, according to the Institute of Chartered Accountants in England and Wales, 75 per cent of businesses do not maintain their accounts with accounting software.

Mike Cherry, chairman of the Federation of Small Businesses, said in his New Year message to small firms: ‘We now have a record 5.5 million smaller businesses and the self-employed, but the rate of growth has started to slow. Our country’s prosperity in 2017 will be founded on the success of the smaller business movement.’

While he said Brexit was the ‘biggest issue of our time’, he said the Government should not ‘forget the domestic’. He said: ‘Any small business owner will tell you that the sheer cost of doing business has steadily risen over the last year, with a range of policy choices hardening at the same time, creating a cumulative effect.’

As well as the roll-out of the workplace pension, the introduction of the National Living Wage has increased labour costs, and Cherry said he was ‘dead set against’ Making Tax Digital proposals, where small firms and sole traders will have to file accounts online every quarter. He said: ‘Government should not be putting in place a mandatory new tax regulation that will cost businesses on average £2,770.’

He also said: ‘Late and poor payment practice from larger firms remains a huge issue for smaller businesses. We now face a poor payments crisis. If this is not tackled, then every year 50,000 businesses will die – leaving £2.5billion of GDP missing – purely due to late payments.’

Meanwhile, commercial insurer RSA warned that smaller firms are increasingly becoming a target for cyber criminals because they are less likely to have cyber security measures in place. It said three quarters of SMEs have experienced some form of cyber attack but only nine per cent have cyber cover.