What’s the current situation?

Few business decisions can be more frustrating than making a major purchase only to discover you have no need of the product.

Many payroll managers whose companies bought a third-party middleware system to manage auto-enrolment will tell you they already had the capacity to manage the workflows – “if only we’d been asked”.

Many employers are failing to give their internal teams the chance to quote for the work.

In this document we tell you the ten top questions you should be asking your payroll, to check they are up to the job. We offer you a range of technical guides they can study to get them over the line, and we give you firm directions if payroll is either unwilling or unable to step up to the plate.

Note: these questions are as appropriate for asking a bureau as they are for asking an internal manager - you need to be talking to the people who do the administra­tion and press the buttons!

Top Ten questions to ask your payroll team

1. Do you know who your workers are? It’s not as simple as it sounds — they may not all be on your payroll. For definitions direct from the Regulator’s mouth, go here http://www.thepensionsregulator.gov.uk/docs/pensions-reform­employer-duties-defining-workforce-v4.pdfemployer-duties-defining-workforce-v4.pdf
2. Do you know what their “qualifying earnings” are? Auto-enrolment can be paid against a variety of earnings definitions - you need to know what they are, and how they impact on your AE cash-flows. Again you can get a definition from the Regulator by going here http://www.thepensionsregulator.gov.uk/employers/dc-qualifying-scheme-tool.aspx
3. Can you carry out a workforce assessment? Some payroll software packages now include a workforce assessment tool as standard. You can carry out a workforce assessment for free at https://www.pensionplaypen.com/choose-new-pension/start. If your payroll don’t understand the question, you need to be worried.
4. Can you manage all the contribution structures permitted to be used for auto-enrolment?
5. Have you tested your capabilities against all the pay reference periods you use?
6. Can you manage the statutory communications to staff?
7. Can you manage bespoke communications to staff?
8. Can you manage those parts of opt-in and opt-out processes the employer is permitted to carry out?
9. Can you interface with pension providers using an online contribution process?
10. What experience have you had with any of the previous nine tasks?

Are you confident on auto-enrolment?

Perhaps the most important question is “do you feel confident that you can manage the auto-enrolment process yourselves?”

To which there can be three answers, “yes, no and not sure”. Think of these three answers like a set of traffic lights:

• Green – says “ok, get on with it, we’ll sort out the pension and you can do the rest”
• Amber- says “ok, you’re plan A but we recognise you need some help, what we can do to get you over the line?”
• Red –says “ok, you clearly don’t want to do this, we’ll work on the assumption that this work is primarily going to be carried out by external management either at the provider or through a specialist middleware support provider.

What if you offer staff a flex program?

There may be a joker in your Pack, where you, as an employer, already operate a Flex platform which is run by a specialist flex software supplier such as Staffcare, Benefex or BenPal. Where you already have an arrangement (or are about to engage with one) there is a strong argument to extend your agreement to cover auto-enrolment.

Whether your payroll is in amber or red, you should be looking at either a tempo­rary or permanently outsourced solution to auto-enrolment administration, if only as a Plan B.

An assessment of which solution is better for you will typically boil down to cost, flexibility, robustness of build, level of customer support and integration with HR systems.

Of course there is a lot more to the purchasing decision than this, and you may need professional help to land upon the solution that is right for you. We would generally recommend software provided by an insurer unless you have flex or are looking to introduce it. Free-standing middleware simply used for auto-enrolment is rarely cost-effective relative to a provider solution, and runs the risk of a break­down in support (relative to systems supported by a large insurer or similar).

A note on NEST

NEST, uniquely among the large auto-enrolment providers, does not provide software support to its customers. It will carry out certain statutory communications but for the most part you are on your own. NEST does not adopt this position voluntarily; the restrictions on the delivery of ancillary services such as auto-enrolment support are written into its permissions and are there to prevent NEST having an unfair advantage over its competitors (given it has taxpayer support).

In conclusion

We are of the opinion that using payroll is best. Www.pensionplaypen.com is currently researching payroll software providers and the providers of managed payroll services (bureaux) to measure their capacity to carry out the tasks listed above. We’ll be publishing this research in Q2 2014. The research will help employ­ers consider better understand their payroll’s current and future capacity to help them and help them with their options.

It’s a vital first step for any employer embarking upon auto-enrolment, that they have this conversation with payroll. Your payroll manager should be aware of auto-enrolment and be able to answer the questions we set out. If there are no answers then you will need to have an immediate conversation with the providers of your payroll software. If your payroll team are uncertain then it may be time for you to investigate upgrading your payroll software to meet the AE challenge or even changing software provider.

But we do not suggest you take any drastic steps till you have investigated the alternatives (provider driven and independent middleware).

In the final assessment it is the workplace pension that is the most important part of this equation. The balanced scorecard, users of www.pensionplaypen.com use to “choose a pension” allows you to weight up or down the importance of auto­matic enrolment support from the provider. In an ideal world, you should be able to discount this to zero and smugly say to yourself “in payroll we trust”.