In response to the IoD’s report on auto-enrolment published today Tamara Calvert, Partner, DLA Piper, said:
‘The findings in the IoD’s report released today demonstrate the challenge that automatic enrolment will pose for smaller businesses in particular, where there may currently be no pension arrangements and where the business is perhaps less likely to have the support of a strong HR, pensions or finance function to implement automatic enrolment. Implementing automatic enrolment is a major project for any business and the lead-in time should not be underestimated.
The key legal issue arising from the report is inducement. Employers may have to look at paying for automatic enrolment out of profits or out of payroll, but they should be careful about how this is communicated to employees. Any suggestion that a pay rise might be given or jobs saved only if employees opt out of pensions savings (whether individually or if opt-out rates hit a particular level) is very likely to be viewed by the Pensions Regulator as an inducement which can attract serious sanction, and even criminal penalty.’
It will also be interesting to see what happens to opt-out rates as medium sized and then smaller businesses start the process. The opt-out rates have been surprisingly low so far and the findings indicate that this has influenced directors' views on how their own workforce might react.’