Workplace Pension Laws – Are you Ready?
Most salon businesses will have to act with regards to the new workplace pension laws or face big financial penalties for non-compliance, so why not embrace it as an opportunity to reward and motivate your team. Ryan Fox, salon management consultant explores what you need to do and how to take a proactive and positive approach.
Recent changes in pensions law has meant that it is now a legal requirement for most employers to set up a workplace pension for their workers. Most large employers have already done it, but smaller employers will now need to start thinking about it as their staging dates (the date they need to go live by) are from August 2015 onwards.
What you need to do
The first thing to find out is when you need to be ready by. Most salon employers will have been allocated what’s called a staging date by government. This is a date specific to your business that you need to have everything in place by so you can start enrolling your workers. You can find this out by entering your PAYE reference number into The Pensions Regulator site.
Making a plan
Firstly decide who is responsible within the organisation to manage the project and draw up an action plan. The advice is to start at least 12 months before your staging date, as there is a lot to consider. You will need to think about which pension scheme to use, how to budget for the contributions that you’ll have to make as an employer and the costs of setting up the scheme. You will also need to consider how you will calculate contributions every week/month; which can be done through your payroll software and do an assessment of your workers to find out who you need to enrol and how to communicate it to them.
Choosing a scheme
If you have an existing pension scheme for your workforce you may be able to use that – check with your pension provider to see if it can be used for auto enrolment. In reality, most salons are unlikely to have an existing scheme for their workers however, so you will need to start a new scheme. Make sure you do this early though as pension providers will be taking on thousands of employers in the coming months (at its peak there will be 100,000 employers a month going through the process). The Government has set up a pension scheme called the National Employment Savings Trust (NEST) to accept all employers wishing to use the scheme for auto enrolment. This is one option, and there are other providers available.
Budgeting for the increased costs
You will need to consider how you are going to fund the additional costs involved in setting up the scheme, paying the contributions into your worker’s pensions and administering it on an ongoing basis. The scheme is funded by contributions from workers and employers. By the end 2018 onwards, employers will be required to contribute a minimum of 3% of the worker’s earnings into the pension with the worker having to contribute a minimum of 5%. It’s therefore important that you factor this into your business plan and consider how you can grow your income to cover these costs.
Positive Pension Presentation
In the majority of cases, the law says as an employer that you have to automatically enrol certain workers into a pension scheme, so if you are going to have to do it anyway, why not make the most of the opportunity to reward and motivate your team by presenting it in a positive way.
For most salon staff it will be a highly positive thing for them to have a workplace pension as, until now, having a pension that your boss pays into has been way out of their reach. You should explain what it means for each team member and include all the communications materials that you are required to give then by law. If you focus on the positive aspects that the additional benefits will bring then it is sure to motivate and encourage good performance, which will in turn grow your income to more than cover the costs. It’s your chance to do something really special for your team that they will reward you for with their loyalty and effort.
Ryan Fox is a hair and beauty salon consultant who improves salon performance through training and innovation. www.umbrellaconsulting.co.uk