Some initial thoughts
Auto-enrolment software exists to automate the processes your company needs to establish to stage and maintain auto-enrolment.
For most employers it is another payroll headache (along with RTI) that needs a purchased solution. Normally companies purchase on a referral basis but this is difficult with auto-enrolment. Those who have staged auto-enrolment are large companies.
Many larger companies have engineered their own processes at great corporate expense.
Companies staging auto-enrolment from now are more likely to buy packaged solutions which can be purchased “off-the-shelf”.
Can we identify key purchasing drivers that are common to everyone?
The common drivers in all employer decision making are compliance, ease and price. Compliance is seen as critical and expensive solutions that convince as future-proof are often purchased despite being pricey and cumbersome.
However, prices are falling and the ease of use of software is increasing.
Where do employers go to buy? Is there a software supermarket?
There is no software supermarket or comparison site. This guide sets out the fundamental choices for you and offers some help in purchasing.
We recommend that every purchasing decision starts by a thorough assessment of your payroll’s capacity to “do the job”.
As a second step, we recommend you talk to your provider. If you do not have a provider or are looking to establish a new arrangement for auto-enrolment, we recommend you use http://www.pensionplaypen.com which provides ratings of all provider’s payroll and HR support services (what is often called Provider Middleware)
So how independent is this buyers guide?
We will try to remain as independent as we can but will be declare an interest in one solution. ITM who provide the software solution EASE, advertise Pension PlayPen and we promote EASE as our “endorsed” product. Otherwise, Pension PlayPen has no links with any
The method we’ve employed to our guide to buying.
To make things simple, we’ve broken the purchasing decision into five easy questions. If you can give a yes to question one- then you’ve probably got your answer, if not – move on to question two and so on.
But by reading through to question five (which is about advice) we think we hope we offer you a purchasing process that works.
HOW TO PURCHASE AUTO ENROLMENT SOFTWARE
Question One – Is your payroll up to the job?
Over 600 payroll software systems are registered with HMRC but the vast majority of companies use the software of a handful of firms, Sage and Iris being the biggest.
Most payroll software solutions offer help to employers with their auto-enrolment duties. But some complex payrolls are complex and some softwares solutions are not ready.
If you want to see how state of the art pensions software looks today, have a look at Sage’s latest advertisement
Question Two – can you rely on you Pension Provider?
Some providers such as NOW Pensions, provide middleware “free” within their product. You can think of this as a fully bundled solution and you pay for it whether you use it or not
Some providers such as L&G and Standard Life charge for the middleware. L&G have a one off charge for getting you set up of £1,000 , after which the software is free. Standard Life charge £100pm for their support which is bundled into their “Good to Go” proposition.
The position with other insurers can depend on whether you are using an IFA or working directly (Scottish Widows have discounts for their software if you employ an IFA).
Do all providers offer middleware- what about NEST?
NEST is an example of a provider that has built strong interfaces with many leading software houses and works with third party middleware or directly with payroll but does not provide integrated middleware.
NEST is a special case as it is prevented from offering a middleware solution by its charter.
Question Three – should we consider independent middleware?
If you are uncomfortable with your payroll and uncomfortable with provider middleware we suggest you use independent middleware.
This will provide a belts-and-braces solution that gives you freedom to change pension providers without having to re-engineer your auto-enrolment processes.
Increasingly we see middleware being offered as a “managed service” much as a bureau manages your payroll on a fully outsourced basis
There are several vendors of independent middleware, the Pension Play Pen’s chosen partner for middleware is EASE ,who offer standalone software for in-house use and a managed service.
Question Four – what about wider considerations such as flex?
As mentioned above, the three purchasing drivers should be compliance,ease and price. For some companies , who provide a full range of flexible benefits and/or complex pensions , integrating auto-enrolment is going to present especial challenges.
This is an area of the market where you really must take advice and it probably is best if you work with your corporate advisers
Much middleware is provided by software houses who specialise in flex. Staffcare,Benefex, Orbit, Benpal and the proprietary software of Corporate Advisers , fall into this category.
The table below shows these additional services at the bottom,
It is provided us by our friends at the Auto-enrolment Advisory Group and gives an analysis of the state of providers as at March of this year. We do not suggest you rely on the the colours of the boxes, but we think it is a useful checklist for you to work out how complete the service you are looking at actually is.
Question five – should you be taking advice?
Although finding an easy,compliant and competitive solution to auto-enrolment is important, you do not need regulated advice to make the purchasing decision.
As the statement below makes clear, your normal business service providers can advise you both on the payroll and pension aspects of your auto-enrolment decision making
Pension PlayPen opinion has changed and is likely to harden; we see payroll as the long-term solution for most small employers with middleware offering a service to employers with a weak payroll function or complicated benefits.
The market is changing and this overview may help to explain the reasoning for these conclusions.
A short history of auto-enrolment software provision
Where the market has come from – bespoke solutions for complex problems
The large companies who staged early on had no choice but to create their own processes. Many employed middleware selectively often to provide tailored communications or to deal with multiple workplace pensions.
The second wave of employers used more off the peg solutions. Ceridian led the way in providing payroll solutions that didn’t require middleware, some providers started using their proprietary middleware solutions. Larger employer benefits companies such as JLT, Capita, LEBC and Johnson Fleming promoted their own-brand middleware solutions.
Where the market is today- the IFA is currently king
The current market is seeing an increasing reliance on payroll solutions. Sage and Iris in particular have come up with cheap ,workable solutions that do not rely on data transfer through third party software.
The market for third party software is now quite mature. This is a heavily intermediated market and is dominated at present by IFAs
Staffcare (who market themselves to IFAs as “Jargon Free Benefits”) , remain the largest middleware supplier and compete with a large number of new systems.
Many offerings are simply white-labelled versions of software available directly. IFAs are key distributors and are critical to ensuring this part of the market remains compliant
We are concerned that there is probably over-capacity in terms of software and-under capacity in terms of people capable of using it.
As mentioned above, our endorsed solution is EASE, which is available as software or as a managed solution.
We see middleware increasingly competing with payroll bureaux to provide employers with a fully managed solution.
Where the market will be – enter the accountants and the bureaux
Smaller companies preparing for auto-enrolment are spoiled for choice with providers, middleware intermediaries and software suppliers all providing products.
In this cluttered world .we see accountants and bureaux being the turnkeys. The purchasing decision will still be the same but the process will increasingly start and end with payroll.
This is partly due to the improvements in payroll solutions as more and more software suppliers provide integrated payroll/AE solutions. It is partly due to the greater simplicity of the smaller company in terms of numbers of staff and the simplification of the payroll operation. And it is partly because IFAs are less able to add value for smaller companies and are less prevalent doing so.
If you are a company staging from the back-end of 2014, we would expect to see your accountant as your primary adviser.
This post first appeared in http://www.pensionplaypen.com