Decisions of a Director…

There I was wondering what to Blog about this week, when the post delivered a letter from The Pension Regulator informing us that our Staging Date for Auto-enrolment is 1st Sept 2017. Even for a company such as ours working in financial services, we still have to make sure we meet our obligations and of course communicate the benefits to our employees. But what should we do?

While younger employees might prefer the extra cash, the older ones probably appreciate the pension contributions more. This got me thinking about the responsibilities of employers to do the right thing which may not be popular among employees in the short term. Will the employers ever get the appreciation from the employees to justify the additional costs of providing a ‘good’ pension?  Or should the warm feeling that comes with knowing that you have done the right thing be sufficient?  Alternatively we could do the bare minimum and put the savings towards the next employee celebration.

Whatever we decide to do, I can be certain that we will be communicating the benefits to our employees.  I want to make sure that they understand the benefits of the company pension, their options and I will also take the trouble to explain why the company came to its decision.

A benefits communication platform like BORIS can’t make the decisions for you, but for £1 per employee per month it will help you to make sure your employees are kept informed and know the value of all the benefits you provide!

Why should SMEs care about employee communication and engagement?

I often talk to business owners about why they decided to start their own businesses in the first place and more often than not the answer is a combination of a deep set belief in being able to do things a better way, the desire to get out of a big corporate environment and/or the opportunity to make more money.

In the past many business owners saw the provision of employee benefits and engagement the domain of big business but over the last 5-10 years the vast majority of successful and vibrant businesses have got there by putting employee wellbeing, benefits and engagement at the heart of their employment and remuneration practices.  But how and why has this been a successful strategy?

The UK is becoming an increasingly mobile and transient workforce and in order to attract and retain a quality workforce, companies can choose to pay higher salaries reducing their profitability, OR they aim to attract and retain staff by making the working environment more attractive.  

By attracting employees solely by the size of the paycheques on offer, companies fill their ranks with employees who are more likely to be constantly looking for better paid jobs elsewhere.

By making your employees the core of your business, demonstrating to them continually that you put their interests and work-life balance at the heart of your decision making process and including them in the company vision, you can build a more loyal and hard-working workforce who might also act as your biggest advocates.  

If asked who you would prefer to do business with, would it be an enthused, happy and motivated company representative or a clock watching employee who is probably looking around for a higher paid (but not necessarily better) job?  Most of us can tell or judge instantly which of the two categories of person they are speaking to.

I know which one would get my business!

Standard tax planning actions as the financial year draws to an end

As we approach the end of the financial year, there are some standard tax planning actions, which you might like to consider:

1. If you own a limited company, it is necessary to declare and pay dividends before 5 April 2015, in order to make full use of the basic rate tax band.  You can always loan the money back to the company if you do not need it.

2. If you have excess funds in your company, it is possible to pay yourself a dividend, incurring higher rate tax, but using the Enterprise Investment Scheme to recover the tax over four years.

3. If you are already planning capital expenditure or major revenue expenditure, it is best to incur the cost before the end of your business’s financial year end, so the that tax relief is received as soon as possible.

4. A contribution to a pension fund will reduce higher rate tax.

Please let us know if you think these could apply to you, and you would like more information.

The Benefits of Employee Benefits

Achieving staff satisfaction and loyalty is not just about salary (although it helps!), it’s about the whole package and the culture that you as an employer provide. A great illustration of this are the results of a recent survey carried out by HR Grapevine which showed that 61% of staff would consider changing jobs to increase their holiday leave and 1 in 3 indicated that they would take a pay cut to secure more days off. 

These latest findings bolster the case for ensuring good employee benefits to assist with recruitment and ultimately retention as well.

Most companies will be fully aware of the logistical cost of replacing an employee with expenditure such as advertising costs and agency fees, as well as invested time such as interviewing prospective candidates. But the money lost in productivity during handover and induction periods can spiral even further and this is a factor that is often not properly considered. A study by Oxford Economics last year estimated that these could run at an incredible £30,614 per employee.

With the costs of recruiting taking a serious chunk out of budgets SMEs should be reviewing how they can retain their staff for longer. Providing the right mix of employee benefits can be a critical component in a successful long-term plan for attracting and retaining employees, proving to be the competitive advantage employers need to succeed. And it needn’t cost the earth either.

Giving your staff access to these benefits will not just mean you increase your chances of holding on to them it can have the bonus of delivering improved business performance as well. Research has repeatedly demonstrated the links between the way people are managed, with the attitude of employee and business performance.

The EB Partnership can help by offering a wide range of services and benefits which can help your business as well as improve staff wellbeing.

Here are just some of the bonuses of providing good employee benefits:

For the employee:

• Increased self-esteem and sense of wellbeing
• Improved staff morale
• Increased productivity levels and greater engagement between staff
• Increased job satisfaction
• Reduced stress and reduced absences due to physical or mental illness/injury
• Improved general health and mental health
• Increased skills and desire to develop

For the employer:

• A framework for a well-managed health and safety programme
• Reduced staff turnover which reduces ongoing costs associated with recruitment and training
• Reduced levels of sickness absence resulting in improved productivity and a drop in additional costs associated with capacity shortage issues such as costs of temporary cover/training, missed deliveries/contracts and related reputational damage, reductions of morale/productivity of remaining team
• Increased engagement between all levels of the organisation promoting a greater sense of inclusion and idea-sharing

To find out about the way we work with our clients to ensure they are maximising the value from any spend made on employee benefits then just give us a call! 

If Father Christmas was an employee ...

Pantomime season is upon us so a seasonal question for you: If you take on Father Christmas as an employee will he have to be auto enrolled? 

There are a number of reasons why he should be (workforce harmony, simpler to administer pensions on the same basis for all staff etc.) but there are also a number of other considerations you could take into account!

For example, where is he ordinarily resident? Let’s assume he is resident somewhere other than the UK, then will he spend enough time in the UK to qualify as resident?! If he does, lets also look at the latest Directives from Europe regarding paying overtime and holiday pay (and given he potentially has up to 51 weeks holiday a year how do you plan for that!

We recommend that you take him on a short term contract until Christmas Eve and then you can safely avoid the earnings spike at Christmas. This, combined with using Postponement from day 1 until 3 months should safely see this situation avoided.

Also, is it likely that he only has one job given the very seasonal nature of his work?!

And let’s not forget his age! Given he is likely to be older than State Pension Age this makes him a non-eligible jobholder. But when you look again surely he is older than 75 and so outside the scope of auto-enrolment altogether!

Other considerations I have had include his means of transport – does that count as a company vehicle, and also what about the Grotto – is that given as part of the job and if so does he pay tax on the Benefit In Kind?!

In summary though – I imagine the Pension Regulator guideline is 'don't assume that because someone is a fictional character they are not classified as a worker for AE purposes.'

Market apathy over auto-enrolment is set to rise

Market apathy continues following an industry appraisal of the UK business markets attitude to Auto-enrolment and how employers should be thinking regarding their future obligations. Currently the entire SME market sector is in a state of total denial, choosing to ignore the requirement which in itself is quite frightening.

It appears that the larger firms are committed to their staging dates and appear to be on track. It is the SME’s and predominantly the Medium sized firms in this community that are in a state of apathy over the whole process.

““Most traditional workplace pensions were set up on a voluntarily basis and had the buy-in from key departments such as finance, human resources and payroll. We are now moving into an era where most plans are being set up to deal with a statutory responsibility and it is unrealistic to expect every one of those departments (who may all be the same person, in some businesses) to treat Auto-enrolment with an equal amount of urgency and enthusiasm.””

— Neil Morrow

Why is this? Is Auto-enrolment seen as a poisoned chalice? Do many of the business owners in the small and medium-sized enterprise sector (those that should be staging right now) really not care about Auto-enrolment. They may have glanced at the letter from The Pensions Regulator or had a brief chat with their accountant, but in the main it is nowhere near the top of their ‘to do’ list, even if they are due to stage in a matter of months.

While most businesses understand the need to comply with Auto-enrolment, a large proportion of the UK’s SMEs are not engaging with the problem. In fact research we carried out in October 2013 showed 49.6% of employers still do not understand what Auto-enrolment is and 88.6% of those due to stage within 12 months have not started preparations.

Standard Life recently stated that it was seeing on a small fraction of the business they anticipated at this stage in terms of the number of companies staging at this year.

2014 Budget, not all good news!

Whilst the vast majority of the pension changes that were announced in the budget were extremely welcome, within the detail there is a proposal to link the normal minimum personal pension retirement age to the state retirement age.
 
What this means currently is that people retiring after 2028 may not be able to take their personal pension until age 57 instead of the current age of 55.
 
You might say: "Not a big deal, I don't think I will be able to retire until 65 anyway!".  However if the minimum age you can take your personal pension is set at 10 years below the state pension age then we may have a problem further down the line.
 
The timeline to move the state retirement age to 68 is already set and most commentators believe the move to age 70 will be announced in the near future.  I also believe that unless the Government can find money to fund state pension payments from somewhere else then the state pension age could easily be moved to age 80 (albeit likely only to affect the younger generations).  If this happened these proposals could see younger generations lose access to their personal pensions until age 70!
 
Although detail on the minimum pension age proposals have not been announced I would reiterate the general philosophy of diversification in relation to retirement planning.  With the very positive changes to the ISA regime including the higher £15,000 subscription limit and the removal of the distinction between cash and investment ISA subscriptions, Individual Savings Accounts have become an ideal supplement to pensions for meeting the majority of people's retirement goals.

Budget 2014 - Who benefits from Osborne's savings revolution ... and what is the impact on Auto-enrolment pension schemes?

It is safe to say that the announcements' around pensions and savings flexibility that George Osborne made yesterday have come as a surprise to all of us!

George Osborne has completely revolutionised the way pensions work; millions of people have just found their pensions savings have turned into a tax efficient bank account. The punitive 55 per cent tax rate they faced if taking out more than they should from a pension has been abolished and the regular withdrawal allowed from a pension has increased by a staggering 25%.

Is this more of a political move than financial? 'It's a matter for people to choose how they spend their money,' said Danny Alexander afterwards - but the Treasury's forecasts assume that they will spend, spend, spend. If people can pull cash out of their pension, and only pay a normal rate of tax, HMT projects it will haul in £320 million more tax in 2014-15 rising to an almighty £1.2 billion more in tax by 2018-19 - which is fine for The Revenue in the short term but with people living longer what happens when all the individual's pension pots are spent? More reliability on the State Pension I fear.

For those pensioners who decide to plan spending their pension pot sensibly then an annuity or a limited income drawdown could still be of value.  With the promise of one year government bonds with an interest rate of 2.8% or a three year bond offering 4% (albeit on a limited offer basis), there is also a step change for older savers when you consider how low the Bank of England base rate is.

But it is not just existing pensioners who benefit. The fact that people are not forced to buy an annuity will benefit those coming up to retirement most. Those planning for retirement now have far more flexibility about how they structure their retirement. While increasing the ISA limit to £15,000 helps those trying to save up a deposit for a house or a flat.

These changes also mean that Osborne can have his cake and eat it when it comes to interest rates. He can tell mortgage holders that it is thanks to the government's fiscal policy that the Bank of England has been able to keep interest rates so low while pointing those from our more senior generations to the higher interest rates that the government is making available to them.

What's critical is that individuals continue to build a pension pot in the first instance which is why the Auto-enrolment scheme is so important. Employers, by law will have to provide a pension scheme to staff - and have everything in place quite soon - or face the financial consequences. 

And the Final thought?

This budget delivers some extremely good news for savers and those who prefer to save for themselves rather than rely on the state. However, we fear that the newfound pension flexibility will lead to a "spend now, pay for it later" mentality which will cause similar if not worse long term problems to those that individuals and the country as a whole have experienced from the explosion in credit card debt and other personal loans.

Without sound advice and a good deal of personal restraint The EB Partnership fear that the Government could be inviting a short term boost to spending at the expense of both our individual futures and those of the nation.