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Auto enrolment case study: Woods Squared

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12th Sep 2014
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Accounting firm Woods Squared, winner of the 2011 Practice Excellence Awards, recently guided its first client through auto enrolment staging.

AccountingWEB caught up with director Alan Woods to find out how the firm managed the task and the challenges it presented.

Background

Woods Squared’s first auto enrolment (AE) experience came with an existing client - a large nursery with staff spread over a number of different sites.

The firm had done the nursery’s payroll in the past and therefore expected an impact on their practice, even if the business decided to use somebody else to manage AE.

The client’s main difficulty was that around 120-130 employees were either youngsters or trainees who did not earn enough to qualify for AE contributions.

In many cases no deductions would be made, which nevertheless meant a lot of admin dealing with new starters and the ongoing assessment process.

Woods explained: “They were a growing business and looking to take on more sites and new employees, but the vast majority of those, probably two-thirds, were for one reason or another not having anything taken off them for auto enrolment.”

AE process

Woods Squared started talking to the nursery about AE in March 2013 - more than 12 months prior to the staging date on 1 May 2014.

Alan Woods said that early on the client felt comfortable with their payroll processes, but as the year progressed, around October 2013, they found they were speaking to a number of financial advisers to get a system and advice in place.

At this point they realised they would not be in the position to manage and administer the staging process on their own.

Woods explained: “At first we introduced them to a financial adviser to talk them through what auto enrolment was, what sort of solutions there were in terms of private pensions, NEST and various other alternatives that might have been available to them.

“But it was really at that point that they got even more confused, because the options given to them didn’t appear to be the best for them as a business, based on their workforce, and the resulting potential cost was excessive.

The following month Woods Squared got more actively involved in the AE process.

“We gave them a forecast of the cost on the business from staging date right the way through to the next change in contribution levels, so we could see exactly what impact it would have on them and their business.

“With that we built in a provision for the cost for us, and other advice that they may need, to integrate that into the business and the workforce,” Woods explained.

With 1 May looming, the nursery elected to postpone its staging date by three months to 1 August to come up with a solution that would better suit the business.

The solution

Woods said that one of the biggest tasks they faced was getting a supplier or product in place to run and monitor the AE process.

At this point middleware solutions were on his radar, who could remove manual tasks such as worker assessment and reporting that are involved with AE.

At the time the likes of Sage, IRIS and other payroll software products weren’t really available and “ready to go” for his early staging client, he said.

“They were certainly too late for this client. Sage only really made their software available around December last year, and IRIS were still working on theirs. Those and a few others were getting close to having a solution, but some of our clients had to stage a little bit earlier.

“So that was a difficultly that we had, just trying to get something that would work. Because we use Sage Payroll in the office to process their payroll, we were trying to get something that would work to process and manage their auto enrolment for them as well.”

The lack of appropriate software and the time it took the IFA to sort the information and come up with a solution added further pressure to timescales.

The IFA had suggested the option of a private pension provider, including Scottish Provident who they were speaking to. But they were asking for much higher contribution levels for AE-compliant solutions than the government-backed pension scheme NEST, and the likes of NOW: Pensions and others.

“So they actually ended up with NEST as their auto enrolment solution, mainly because of the contribution levels that were allowed into it, and the fact it was more flexible in that they could start with the lower contributions that are available and then review that over time.

“The private and personal pension alternatives were looking at anywhere from 7% combined contribution upwards, rather than the 2% combined contribution, which NEST, NOW: Pensions or The People's Pension allows,” Woods said.

He added that the firm helped the nursery on the communications side of AE for all the general notices and ongoing monitoring.

“We’re maintaining that for them at the moment. It makes sense from an accountant’s perspective to incorporate auto enrolment within that process. Otherwise if you’ve got more than one person involved it could get a bit confused with who is doing what or increases the time involved in waiting for one person to do one part of the process and then move on to the next part of the payroll.”

Main challenges

The greatest challenge Woods Squared faced was getting the right software and processing solution ready for staging.

In comparison the actual AE side of it was relatively straightforward, Woods said.

“We understood the legislation, we knew what needed to happen. At the time we wanted to have Sage and make sure it did what we wanted it to do, but the auto enrolment module wasn’t available,” he added.

“We were being told by Sage that the software would be ready and that it was coming out soon, but they kept putting it back, so we were having conversations with our client saying it will be ready but we don’t know what it will be or not be.”

The most difficult task was putting the client at ease and convincing them that it would be alright, that there would be a solution, even if the accountants didn’t know what it would look like.

Woods encountered another big issues after it started processing the AE contributions. Sage doesn’t allow you to change the pay period from a calendar basis to a tax month - for example from the end of the month to the 5th of the next month. While it isn’t a major problem going forward, Woods said it was a bit of a hassle in the first month.

Costing

Woods said the firm was calculating the AE costs on a per-employee basis, and as it’s a new service area, they were doing it “as best we can”.

This means offering discounts for those signing up for a longer-term contract with the firm, as well as those opting for software advice and training.

“It’s all a bit trial and error at the moment. A lot of the employees don’t make any contributions, so we’re working out how we cost that as well.” Woods said.

But he added that every employee, every month, needs to be assessed, which incurs costs even if they don’t need to make a contribution.

The firm’s next set of clients are staging for AE in six months’ time, so Woods is starting conversations with them now.

“Accountants need to be getting involved or they’ll go elsewhere. We need to be pro-active, offering, learning and providing a reliable service in this area,” Woods said.

Please share your auto enrolment experiences below so the rest of the community can learn from your successes or mistakes.

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.

Replies (10)

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By Ed Holt
13th Sep 2014 10:23

Woods Squared - you're not alone!

What an excellent case study! It is detailed and honest, and brings home the challenges that accountants / payroll bureaux are starting to face across the country.

What  is most 'scary' (and I talked last week to an SME employer who said she was 'scared' by the prospect of AE) is that Woods Squared are just talking about one client -it would be interesting to know how many clients the firm still has to stage. It will get easier as knowledge and experience increase............ but how my days to help a client to Staging? and how many minutes per client to process AE weekly or monthly? Is the current model scalable or sustainable? 

Remember it's not just about the assessment and communications, which the payroll software MAY help with, but also getting the contribution schedules and joiners/changes onto the provider system, managing all the return data eg opt outs and then all the record keeping and audit that the Regulations demand - oh and the Declaration of Compliance to TPR - who is doing that?

For the past 6 months we have been talking in detail to accountants, payroll bureaux an AE consultants, as we have been developing and launching our AEexpress Bureau Edition. The sort of feedback we are getting is 'nightmare' 'headache' 'massive problems' and 'my payroll provider sends a new fix each month and it still isn't working!'.

The challenge that Steve Webb and the DWP face, to get 1.2 million SM employers successfully into and through AE, is huge - but on a macro scale.

The challenges that accountants and payroll bureaux face are real, immediate and daily - and we've barely started. With only a few 2014 clients, and a few more in 2015, most will mange with manual intervention. In 2016 there are 450,000 stagers (a ten fold increase compared to the 45,000 in 2015) - at this point the point the feared 'Capacity Crunch' will hit the market, not at the Pension Provider level (NEST will cope, they have to), but at the point where 'the rubber hits the road' ie the accountants, payroll bureaux and bookkeepers to whom 80% of SMEs will turn (According to DWP and TPR research).

Those companies will be in the front line of demand and will need automation and collaboration between the multiple players in he chain. Automation is emerging, and www.AEexpress.co.uk is an example of that; collaboration is being encouraged by the Friends of Automatic Enrolment (FoAE) promoted by the CIPP - and supported by Accounting Web and its 'No-one Gets Left Behind' campaign - the more who sign up and participate, the more likely we are to get joined up solutions avoid the 'Crunch'.

Ed Holt, Director, AEexpress

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By chatman
13th Sep 2014 13:51

@Ed Holt - What are your Prices?

@Ed Holt - OK, I took the bait and clicked through to your site but couldn't see any prices, so didn't look any further. Can you tell us what they are or where to find them on your site?

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Replying to TheChief:
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By Ed Holt
13th Sep 2014 19:15

AEexpress prices

Hi Chatman

Nothing secret about the prices - we send them individually to a request on the Contact page.

But to give you an indication, the model is as follows:

Pricing is per employer (as they have the Regulatory duty) - there are 2 charges - 1) Set up fee (which includes the set up of the pension on the Provider system and communicating to employees), starts at £300 for a sub 10 employee firm then 2) monthly fee for on-going processing (ie periodic assessments every payroll run, production and email / download delivery of employee communications, schedules sent to providers, opt out and postponement management and record keeping + audit); monthly fee is £15 for sub 10 employees (self-service) or £20 if the Supported option is chosen. NB we don't differentiate between monthly and weekly/fortnightly payroll - it is a cloud based service for you to use as many times as you need (including Test assessments) for the monthly fee.

Model for Bureaux is as follows:

- no set up fee or initial licences

- no commitment / long term contract (use it once, see if you like it / it provides value, hopefully you keep on using it)

- margin on all Employer fees paid to the Bureau ie a new line of business /revenue stream

Drop m a line if you'd like to know more - [email protected]

Ed

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By Michael Norton
16th Sep 2014 12:51

AE

Hi Ed

Does your system integrate in any way with Sage Payroll?

 

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Replying to Duggimon:
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By Ed Holt
17th Sep 2014 23:18

AE with Sage

Hi Michael

Yes we can take data from Sage - either from their payroll system (pre-assessment) or potently from their Pension Module (ie post assessment) - this is our model with any payroll system - we don't 'fight' them for assessment but can complement by doing the employee comms, opt out management, postponement and most importantly all the 'traffic management' of files to/from the provider

Ed

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blue sheep
By Nigel Henshaw
18th Sep 2014 13:13

I am suprised by the lack of comments on this, I presume most on here, like me, have clients with staging dates in 2016 and have therefore not really looked at AE properly yet.

I do however intend to talk to clients from now on about AE and that they need to expect an increase in compliance fees of circa x amount as it will very soon be with us.  Even if I do not as yet have a firm plan in place.

One thing I still have not got around to finding out is the compliance and the cost of compliance for a one man Ltd Co that doesnt want to opt-in.  Those will be about 75% of our payroll clients.

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Replying to Adam12345:
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By chatman
18th Sep 2014 22:22

One-man limited companies are exempt aren't they?

NH wrote:
One thing I still have not got around to finding out is the compliance and the cost of compliance for a one man Ltd Co that doesnt want to opt-in.  Those will be about 75% of our payroll clients.

One-man limited companies are exempt aren't they?

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Replying to Tax Dragon:
blue sheep
By Nigel Henshaw
19th Sep 2014 08:39

where did you read that?

chatman wrote:
NH wrote:
One thing I still have not got around to finding out is the compliance and the cost of compliance for a one man Ltd Co that doesnt want to opt-in.  Those will be about 75% of our payroll clients.

 

One-man limited companies are exempt aren't they?

Where did you read that?

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By chatman
19th Sep 2014 09:54

@NH: Single-director Companies

Can't remember where I saw it first, but a quick Google search shows it here: http://www.thepensionsregulator.gov.uk/docs/detailed-guidance-1.pdf

"One-person companies
29. If an individual is a director of a company and the company has no other employees, that individual is not a worker by virtue of any office that they hold or contract of employment under which they work. The company is therefore not subject to the employer duties in relation to that individual."

Thanks (1)
Replying to Paul D Utherone:
blue sheep
By Nigel Henshaw
19th Sep 2014 10:05

thanks

chatman wrote:

Can't remember where I saw it first, but a quick Google search shows it here: http://www.thepensionsregulator.gov.uk/docs/detailed-guidance-1.pdf

"One-person companies
29. If an individual is a director of a company and the company has no other employees, that individual is not a worker by virtue of any office that they hold or contract of employment under which they work. The company is therefore not subject to the employer duties in relation to that individual."

Thanks, somehow I had missed that one

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