The Government is calling for ideas to simplify auto-enrolment. 

I had an interesting discussion with a senior payroll policy lobbyist yesterday. She argues that the “workforce assessment” is too problematic to become part of the normal payroll function of Britain’s 1.8m smaller companies and that we should instead auto-enrol all employees.

I can see her point, nobody told payroll operatives they were signing up to become pension administrators – let alone pension managers. If they were working for LRT, no doubt we wouldn’t have been paid these last few years!  Apparently payroll people aren’t happy and are threatening to stop being payroll people and be something else.

I will return to the issue of payroll morale at the end of this blog, but let’s try to remember what the workforce assessment is there for.

Here’s the point…

1. It stops the very youngest and very oldest workers from being automatically enrolled into a workplace pension
2. It stops those who aren’t ordinarily working in the uk from being enrolled
3. It stops those who earning too little from being enrolled.

The point of excluding some people is to find the right balance. We are trying to enrol the right people at the right time of their lives. This is useful for employers and it is useful for employees.

The workforce assessment is not an elaborate game of snakes and ladders devised in Whitehall to trip employers up. It is not a cruel trick played on employees to force them out of welfare and into self-dependency.

Auto-enrolment is about finding the right balance between “reasonable force” and the natural libertarian principles that underlie British democracy.

Is it too complicated and can we simplify?

The devil’s in the detail, and here’s the detail about how you work out if someone’s working for you. In my opinion, this is where simplification can be achieved. Read these detailed guidance notes and you realise that you are walking through a legal minefield, not once, but every pay period.

There is scope for simplification in this detailed guidance and better minds than mine are working hard to ease the plight of those who have migrant workers, employ seafarers and those who work on oil rigs and the like.

The core principles of the assessment are simple and sensible

But as for the core eligibility criteria, age and earnings, I think there is general consensus that these are right.

The current pattern is accepted, understood and is increasingly coded into payroll processes either through the core software or through third party software (known as middleware).

To remind everyone,  here’s how you look at your staff by age and earnings.

Figures correct as of 2015/2016. *SPA = state pension age

1 Has a right to join a pension scheme

If they ask you to, you must provide a pension scheme for them, but you don’t have to pay contributions.

2 Has a right to opt in

If they ask to be put into a pension scheme, you must put them in your automatic enrolment pension scheme and pay regular contributions.

3 Automatically enrol

The long term solution for payroll people

Those are the rules and millions of employees are being assessed every pay period by large and medium sized employers.

Life’s complicated because state pension age is a moving target, because the lower end of band earnings no longer corresponds to the top of the nil rate income tax band and because most people have variable earnings which have to be treated in a special way.

But the point is that you can now get workforce assessment software that does the heavy lifting for you and it doesn’t need to cost the earth. http://www.pensionplaypen.com will allow you to do an immediate assessment for free – try it here. This is not the kit to do the work every month (you wouldn’t want to be faffing with CSV files as we still have to)!

And this brings back to payroll. At the moment , many payroll people (agents and in-house) still have to work manually – cutting and pasting- downloading files and sending those files- often by unencrypted email -from place to place.

These problems can and will disappear when payroll software companies provide a way for payroll to talk with pension providers using proper data integration techniques. This means moving to the straight through processing of data using proper encryption and with data passing in and out of systems through data gateways (API technology).

Linking websites this way is well underway, it is made easy by everyone employing common data standards (that should be a common data standard but certain providers still want to use their own data standard so we have to have more than one).

The Pension Regulator’s position

Yesterday, the Pension Regulator published a response to a consultation on what could be done for the smallest employers (what they call the micro-micros) who don’t use proper payroll software but pay people using a spreadsheet or some such back of an envelope technique.

These people need a back of an envelope workforce assessment tool and the Pensions Regulator has decided to build one for them to use.

We think tPR have got this response about right (to use the parlance – it is proportionate). They conclude that if these micros were to do this work manually, disaster would follow.

The consultation responses indicate that a high proportion of (micro) users would not seek the use of commercially available software. Attempting to assess their workforce and calculate contributions manually could lead to errors, burden and non-compliance. For this reason, we believe there is a need for a tool to mitigate the compliance risk.

We recognise that the existing payroll provider market offers a range of either free or low cost solutions that include automatic enrolment functionality. (Micro)users, if they wish, can currently find and access a range of these products through lists and links hosted at http://www.gov.uk/ payroll-software/overview ….

We will continue to offer information about the range of options that (micro) users should consider using including payroll software.

Doing the workforce is a pain, it is the job of industry (and for the smallest employers perhaps tPR) to make is as painless as possible. It is the job of Government to simplify rules where it can to reduce the pain further.

But it is not needless pain. The point of workforce assessment is to make sure the right people are paying the right contributions at the right time. We have invented a world-class system and the world is watching as we refine that system to be even better.

Don’t throw the baby out with the bath-water

It is not a good idea to throw the baby out with the bath water- we do (from time to time) need new bath water. Now is such a time.