As from yesterday, auto-enrolment into pension schemes began for employees of Britain’s largest companies. Few, if any, law firms need to worry yet, although almost all employers will be within the scheme by 2017. More from Personnel Today here.
On the face of it, this is a good way of ensuring that workers have saved a significant amount for their retirement. Its effectiveness in part depends on future governments resisting the temptation to inflate away public debt.
What effect will this have on employers?
Firstly, this is another administrative burden. It will be easier for large companies with HR departments to cope than for small businesses. The penalties for getting it wrong can be significant.
Secondly, the employer’s contribution, which will rise to 3% by 2017, further increases the cost of employing staff. There are whispers that it may well rise further in years to come.
Lastly, employees will “lose” 4% of their pay, in the middle of a recession. How far they will expect an employer to make up the shortfall is a moot point.