Auto enrolment: Pricing the opportunity

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2016 will present many opportunities for professional service providers as more and more employers start to stage for their automatic enrolment duties and obligations, says Mike Foster.

The recommendation from the Pensions Regulator is that those staging in 2016 should already be in planning mode, but in reality this is still being put off by many employers.

Automatic enrolment presents professional service providers with an opportunity to attract new clients or upsell to their existing clients. Automatic enrolment administration is a task that many entrepreneurs are saying they will not personally wish to be involved with. This is very likely to present you with new prospects that you possibly did not have when you are solely offering bookkeeping, accounts and payroll support.

In my opinion, it is a support service that can be offered with the ease of delivery. Many bookkeepers, accounts assistants and payroll bureau providers are very good administrators, who like their numbers, and are therefore in the position to maximise the opportunities around AE.

In my last article I spoke about the behavioural styles of individuals in the profession. I have profiled, together with Thomas International, many bookkeepers and accountants and many show the characteristics of steadiness and compliance, which makes them ideal for administrative type roles, service and support. They are comfortable with routine, systematic, have good attention to detail and like orderly procedures. Meeting many people who offer accounts, bookkeeping and payroll support, they can all often see the administrative task required to organise the business processes that sometimes the entrepreneurial business owner cannot see.

The question right now for many professional service providers is how to price such a service.

I was recently reading 6 quick tips for a successful pricing automatic enrolment strategy that opened with the comment “a clear pricing structure will allow any bureau to accurately cost and schedule the work involved for each client.” This made some great suggestions, so I reflected upon how this opportunity could be priced in practice and then presented to the prospective client and employers you wish to attract.

On review of many offerings that have already been established, there has been much linkage to the payroll support offered by professional service providers. Traditionally a payroll support model has been based on hourly rates, pay runs and/or charge per payslip.

However, for many perhaps this is the first opportunity to explore value pricing. Excellent AE administration and support has a value to the employer that is much greater than these charging models.

Can I suggest that we do not naturally link our support for AE with our payroll proposition? Yes, we know in reality that it forms part of the processing and administration of a payroll and we are likely to administer both at the same time. However, employers may be thinking differently. For example, I was recently at a meeting of the Federation of Small Business and spoke to many business owners who did not consider the obligations as a payroll task, but another specialist administrative duty imposed upon them by government. Therefore, I believe this thinking around the ‘pain and problem’ for the employer will therefore support a value pricing model rather than falling into such traditional pricing practice.

Another consideration for your pricing is to develop a menu of support options that you can present as your pricing model. You could link this with the payroll administration support or just adopt the menu pricing model for your AE offering.

Either way, the suggestion is to highlight the detail of your support rather than simply offering “administration support for automatic enrolment” as another product. Create a menu by considering your support offering and break down this support you offer, such as:

  • Updating and reporting to the employer/client
  • An initial consultation
  • Setting up the AE scheme to meet the initial obligations and enrol ‘eligible’ jobholders
  • Act as a nominated contact for the Pensions Regulator
  • Regular assessment of the workforce
  • Communicating with the employees
  • Establishing the pension scheme
  • Administering the scheme including managing postponements, opt out’s and in’s, triennial re-enrolment
  • Communicating with the pension provider to submit payment details
  • Proactively managing communication requirements with the Pensions Regulator

You may then consider two or three menu options that offer part or all of these solutions. Option one may just be the initial consultation, option two could include the set up and option three the full package.

Using the menu pricing model, you are able to demonstrate the value of your support and build upon the prospects pain, problem or fear to then support your desired price levels. You may even highlight the potential fines for non-compliance in your pitch, so they then fear such fines if they miss something.

In practice, once the employer has identified that they need the support then some may start to negotiate on the support price. With menu pricing, you can reflect such a request to the elements of the offering and ask them which parts of the menu they therefore do not require. I suspect most will reply that they need it all and therefore will clearly see the value and pay the price you desire.

Finally, the offering around AE also presents us with the opportunity to form strategic alliances with partners to support and offer further value to our own offering. For example, you may outsource the processing or partner with an IFA for pension advice that forms part of your overall package.

So how can you seize the opportunities ahead?

Mike Foster is co-founder of The Bookkeepers Alliance and The Entrepreneurs Mentor.

AccountingWEB has launched the No-one gets left behind campaign to alert as many accountants as possible to the obligations implied by auto enrolment. Read our simple eight-point statement which sets out the auto enrolment facts you need to know.

Mike Foster
Co Founder and Director
The Bookkeepers Alliance
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14th Jan 2016 15:47

Well said Mike. This a question we keep getting asked by our customers as no one is quite sure how to increase their prices. I recently published another article on Accounting web that may be interesting to look at - How to increase charges for AE without losing clients

 

Thanks (1)
14th Jan 2016 18:50

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My clients tell me its a "cheap is best" compliance headache, and largely a payroll issue.

So far I have done one in house for a micro biz with couple of employees who didn't want to be in the thing in the first place, and it wasn't that hard to do, just a bit of form filling, took about half a day over a couple of weeks waiting for stuff to come through. I only did that to understand the process and what all the fuss is about.  Not much it turns out, follow the steps on the website and its just a bit dull. 

Roll forward and in 5 years time, this will be a routine task, its only in the interim there is a bit of work as clients dont know what to do with it where I think accountants will have much to do with it (unless they offer payroll services, I dont do admin/bookkeeping type tasks) but the general view is this is just employers NI hike by the backdoor with some extra hassle on the paperwork, and much of that can be glossed over quite frankly. 

There aint no "value" in it, just some paperwork to go away. 

Thanks (2)
15th Jan 2016 08:02

Thanks, that's valuable

ireallyshouldknowthisbut wrote:

My clients tell me its a "cheap is best" compliance headache, and largely a payroll issue.

So far I have done one in house for a micro biz with couple of employees who didn't want to be in the thing in the first place, and it wasn't that hard to do, just a bit of form filling, took about half a day over a couple of weeks waiting for stuff to come through. I only did that to understand the process and what all the fuss is about.  Not much it turns out, follow the steps on the website and its just a bit dull.

Really usful to know. As I have avoided the whole thing so far it's nice to feel I could bumble through if a client insists they really need help with it.

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15th Jan 2016 10:46

Oddly enough, I've emailed our first to stage client this morning to bring processing forward a day or two, just to allow for any complications. We'll assess fees for everyone else based on the work and time for this client.

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15th Jan 2016 14:30

What does this closing question mean?

Mike Foster wrote:

So how can you cease the opportunities ahead?

Having had experience of a couple of clients who have staged, I would not dream of offering a fixed price menu.  The clients who have staged so far have many more employees than the micro employers coming up in 2016 & 2017 and they needed to be treated as individual cases because of their different complexities and problems.  Perhaps later on in 2016, when I have done a few of the micro employers with less complications, I will be able to estimate a standard fee.

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19th Jan 2016 10:52

Theres a free cloud tool for flexible menu pricing for AE

Over the last two years I have staged in excess of fifty clients and think there is a way of offering flexible menu pricing for clients.  They can choose to pay an up front fee for the set up or pay it over the first 5 months - from staging to declaration and then pay ongoing for just the monthly fee for the assessment and pension filing.  I don't think this tool is being seen by accountants but its free to use and there are online training sessions too.  The link is here :- corebenefits.co.uk.  Its a bit hidden so scroll down to the bottom of the page.  Hope this helps.

 

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