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Umbrella company auto-enrolment

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A huge array of small and medium-sized enterprises, numerous umbrella companies among them, will need to be fully compliant with the government’s pensions auto-enrolment scheme by July 2016. It cannot be over-emphasised just what a major undertaking this will be for all those with staging dates set for the summer of next year.

Compliance will inevitably involve additional costs for the companies staging in July: a vast amount of work is needed to get everything shipshape to comply fully with the scheme. Smaller businesses, in particular, which lack the in-house pensions and legal expertise of the big corporate players (and will therefore have to depend on external consultants), are bound to find the process challenging.

Companies with ten employees or more generally understand the reasoning behind the scheme and accept that they will be affected by it. However, for small firms employing one or two people, auto-enrolment really feels like a painful burden, especially if the employees are low-paid.

In the latter case, the entirely good intentions behind auto-enrolment perhaps meet the limit of their benign effectiveness: the amount of money these smaller firms will be required to put aside for low-paid workers will be so minimal as to make hardly a jot of difference to anyone. Yet the administrative costs are going to be decidedly hefty, even if the end result is barely discernible.

For some small firms, the temptation will be to seek to circumvent the scheme by keeping staff on as subcontractors rather than employees. Others will almost certainly be driven to freeze pay rises because the money that would have gone into increased employee remuneration has already been spent on setting up auto-enrolment and the arduous admin that goes along with it.

For umbrella companies staging in July, however, the picture should be in most cases substantially different. Market leaders such as Crystal Umbrella have been in the forefront of efforts to prepare early, and are well positioned to meet all the compliance criteria in the summer of 2016.

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