Engagement the key to pensions auto-enrolment

Companies that merely comply with the phased-in auto-enrolment legislation will miss out on goodwill that can be generated within their employee-base, reports Xafinity Consulting.

With 30 per cent of respondents to its latest Personal-Accounts survey stating that they've not started to prepare for the scheme, Xafinity has challenged organisations to think strategically in order to reap the added benefits around employee engagement and corporate reputation.

Pat Wynne, director of Xafinity Consulting, said: 'Companies have two choices in their approach to implementing the auto-enrolment regime.

'Employers can approach auto-enrolment in a tactical way - merely complying with the regulations and doing the bare minimum.

'This approach is unlikely to generate goodwill among their staff members as many will be feeling irritated if they're obliged to contribute four per cent of their salary and the employer is contributing just one per cent - there is no incentive here and many will opt out (and under new conditions will need to be auto-enrolled again in three years).

'A strategic approach whereby the company reviews the role that workplace pensions plays in its total-benefit strategy and conducts an audit of its staff population (to gain an understanding of the number of staff currently outside pension provision) will pay long-term dividends.

'Companies need to weigh up the cost and benefits and while the cost will present some challenges, handled sensibly they could create a fairer working environment, encourage engagement among staff and position the employer in a more positive light - at the same time lessening the administration burden,' Wynne added.

Fairness aspects should not be ignored.

Unless companies take a holistic review of their pension policies, they may end up with a tiered approach to pension provision in their organisation, reported Xafinity.

Wynne continued: 'Valuable staff members may feel discouraged when they're contributing more than the employer in the initial phase and others around them are on "legacy deals", which are more valuable.

'It is important to craft meaningful communications to diffuse any negativity within your organisation.

'Companies cannot afford to keep their head in the sand when it comes to the introduction of auto-enrolment and personal accounts and the sooner they start to review their options and what will work best for the company and its employees, the better off they will be.

'For the third of schemes in our personal accounts survey that have indicated they're not prepared for personal accounts, I would recommend they seek some advice now.

'By starting now, companies will be able to take a strategic, long-term view by considering why and how the employer's pension spend should be allocated, to whom it should be allocated and what "knock on" effects such spend will have on wider compensation and benefit issues,' Wynne finished.

Xafinity recommends that companies consider the following points in relation to the introduction of auto-enrolment and personal accounts: changes that may need to be made to an existing scheme to pass as a qualifying workplace pension arrangement; understand the potential additional cost of (including current non-pensioned) employees; the use of existing arrangements against the adoption of alternatives; and appreciate the impact on HR systems and payroll.

Back to top