The accelerated rollout of automatic enrolment (AE) for small and micro businesses will create a huge opportunity for accountants in 2017.
More than 500,000 businesses are due to set up a pension scheme this year under AE legislation, and for many small businesses, dealing with the changes remains a mystery.
Recent figures from The Pensions Regulator reveal that the number of employers failing to fulfil their AE duties is rising sharply and many small business owners will be turning to an adviser or their accountant for help.
Perhaps the biggest challenge small businesses face is contending with more and more complicated payroll requirements.
For Paul Bulpitt, co-founder of The Wow Company and head of accounting at Xero, the issue of AE in the profession was a well-trodden path but that many businesses were still getting to grips with process and workflow.
“My sense is that most accountants are on to this, but the challenge is to do it profitably, how they manage it and what their processes are like” he said.
Bulpitt said the services accountants can offer presents an opportunity around offering payroll as a service, which brings in the auto enrolment and potentially other employee-related services.
“Payroll is becoming more and more complicated for small businesses, and less and less people at a small business can do it for themselves,” he said. “Payroll has always been a thankless task, but now there’s actually a lot of value that can be added by taking away the hassle of auto enrolment and RTI - and delivering services around employment issues.”
The starting point for accountants is figuring out what level of service they want to provide their clients.
When it comes to what levels of a payroll service you can offer, Bulpitt said: “You’ve got the compliance factory kind of payroll bureau, just churn it out, and on the flipside you’ve got your all-encompassing payroll service.”
He added: “But I’d be willing to bet that even the smallest sole practitioner gets involved in payroll, even if they’re not running the payroll. They’re touching payroll as part of the process. If they’re producing a set of accounts they’ll have to be looking at payroll journals. If a client has outsourced payroll they will probably be checking the payroll at some point. So it’s not like it’s completely foreign.”
Key considerations for getting up and running are staffing, software and processes, and then how you wrap it up into a commercial offering. “Do you offer basic and premium, or do you just have the premium offering,” Bulpitt said. “At the premium end the advantage that accountants have is that they’re in a position of trust and there should be some value in having everything under one roof. The overall value proposition is: ‘you get on with running your business, we’ll just take the hassle away from you’,”
Many businesses have turned to an IFA for AE because they hear the word ‘pensions’, but it’s actually a payroll thing for the small business and the accountant, and it needs fixing. If you don’t want to handle it partner with a payroll bureau.
When it comes to the software angle, more and more of AE can be automated.
To help meet these new requirements, software vendors are deploying end-to-end payroll packages to handle everything from employee communications through to integration with your AE provider to help streamline the whole process.
How have you tackled auto enrolment for your clients? If you haven't already, what options are on the table for your practice?