FROM JULY 2014’s RECRUITER MAGAZINE

Although recruiters may not be snowed under by a physical paper mountain, the administration caused by new laws and changes to legislation still needs to be dealt with. Sue Weekes investigates

With the introduction of the Agency Workers Regulations in October 2011 and the arrival of HM Revenue & Customs Real-Time Information in 2013, the pressure has been on for recruitment businesses to get back office systems in order to deal with the extra administration such legislation brings.   

If that wasn’t enough, there is also the not-so-small matter of a landmark change in workplace pensions law to deal with. Pensions auto-enrolment means that all employers are legally required to enrol those members of staff who qualify into a pension scheme. For bigger companies, pensions auto-enrolment staging dates began back in October 2012. Many medium-sized firms have also gone “through the gate” and smaller companies are timetabled to do so between now and 2018. 

Unless robust back office systems and software are in place, many recruitment businesses will struggle to cope with its demands. The signs are that it is already proving an issue for some. 

Data obtained by outsourced employment provider Parasol under the Freedom of Information Act reveals that between 1 October 2012 and 30 April 2014, The Pensions Regulator recorded 25 breaches by recruitment agencies and staffing firms. Parasol reports that the nature of the breaches wasn’t known but examples could be poor record-keeping, a lack of communication and encouraging or coercing workers to opt out of a pension scheme. The regulator revealed 13 voluntary visits were made to recruitment firms during October 2012 and December 2013 to share “good practice”. Fines of up to £50,000 can be imposed for non-compliance.

Derek Kelly, managing director of Parasol, says the figures should act as a stark reminder to the recruitment industry that it is “being watched like a hawk” over pensions auto-enrolment. “Although no fines have been imposed to date, it’s likely that the regulator’s patience may wear thin as time progresses and that future breaches could result in financial penalties,” he says. 

Clearly it is those recruitment businesses which pay large numbers of temporary, seasonal and part-time workers that are likely to have most issues given the changing nature of their payrolls compared to other businesses. And it is impossible to manage this level of information without the right software. 

“It means you are dealing with vast volumes of data coming in and out on a regular basis,” says Jason Martin, commercial director of Safe Computing, which provides payroll, HR and financial software and services to recruitment firms. “You might be paying 25,000 people a week but they could be a different 25,000 over the course of several months. It’s the constant changeability that causes problems.”

Preparation and advance planning is everything when it comes to auto-enrolment. Parasol had to implement a compliant workplace pension scheme for thousands of contractors and created a dedicated project team more than a year ahead of its staging date, involving a number of departments including operations, employee support, HR, finance/payroll and IT. 

“Responsibility for administration now sits with the finance/payroll team, which liaises closely with our provider, NEST [National Employment Savings Trust],” explains Kelly. “This is an arrangement that works well for us.” 

Not all companies prepare this well though. “Some are only two months away but have still done nothing about it,” reports Martin. “They haven’t worked out how they are going to deal with it or who provides the software. We are even getting calls from people saying their software provider isn’t really helping them and how can they replace their whole middle and back office at the same time. You must plan ahead and check that your technology provider can support you.”

There are two parts to implementing auto-enrolment. In most organisations it will be the payroll system that handles the assessment/calculation of auto-enrolment since the pension contribution is deducted from payroll like tax or National Insurance. Payroll/accounting software providers will provide a capability in their software to manage this aspect but ideally firms also need to be able to interface to the pension providers such as NEST or NOW: Pensions. 

Martin explains that Safe has built automation into its software and out to the pension providers which, he says, makes it “admin lighter” for clients: “We have a proper data interchange taking place between the two systems.”

Cambridge Recruitment Software Solutions (CRSS) similarly has developed interfaces between the two sides to bring more automation to the process with the majority of its clients using NEST and the remainder NOW: Pensions. Managing director Jeffrey Anderson says further providers’ interfaces could be developed but this isn’t “a five-minute job”. 

CRSS has around 10 clients that are up and running with auto-enrolment, of whom some pay 4,000-5,000 people a week. Anderson reports that some recruitment firms have found it “more onerous” that they expected in terms of administration and warns that even with automation built in they need to be aware of certain issues. For example, having sent the payroll file to the pension provider, there may well be error messages that arise, especially for those in the early stages of auto-enrolment. 

As Anderson points out, there can sometimes be 40-50 pieces of information relating to a worker in the auto-enrolment file. While errors may be relatively minor, such as not yet having a National Insurance number for a particular worker, they all add up and contribute to the workload. 

“There will always be a bedding-in period. One agency I know didn’t get on top of the errors at the start and so these compounded,” says Anderson. “So it’s better to throw resources at the problem at the beginning so you don’t make mistakes going forward.”

One way to ease the burden initially is to automatically enrol people in stages by using the option to defer for three months. Kelly explains that Parasol did this to combat the high levels of turnover among its temporary agency workers. 

Jonathan White, head of sales, Sage HR and Payroll, agrees that deferment can be a good option. “If you have a temporary worker who’s employed for a short period of time then if you have the right system in place, it can automatically manage this postponement,” he says. 

“This reduces the number of temporary workers that are opted into the pension scheme, provided they work for less than the three month period.”

As well as the transactional side of pension-auto enrolment, recruitment businesses should also beware under-estimating the level of employee communication that is also required to remain compliant and for many this is a continuous process. All eligible employees must receive communication informing them of the scheme and the option to opt-out and the process of deferment, for instance, can bring additional communication. 

As White points out, while the responsibility for executing auto-enrolment lies with payroll/finance, line managers and operations personnel should be involved in communication on matters such as opting out. “Regardless of which team has the overarching responsibility, collaboration is the key to ensuring automatic enrolment runs as smoothly as possible,” he says. Some pension providers, such as NOW: Pensions, will handle employee communication for the firm.

Clearly, some agencies are still burying their head in the sand. Kelly warns that when it comes to auto-enrolment, leaving things to the last minute could lead to an “administrative, legal and reputational” nightmare. 

He also warns that with the explosion in the number of businesses approaching their staging date since last autumn, it could lead to providers shutting their doors due to the inability to handle the sheer volume of complex work coming their way. 

“The phenomenon is known as capacity crunch,” he says. “More than 1,000 mid-sized firms were expected to reach their staging data between April and July 2014 and remember this is just one sector of the UK economy.”

Pensions checklist

Must do’s for those firms whose staging gate is approaching

• Plan early, at least one year if not 18 months before the staging date and form a project team 

• Research your pension provider options

• Talk to your software provider about how it can support you through the process 

• Put a communications strategy in place that aims for clarity and full transparency

• Assess who you need to enrol and check employee records have all the information required by auto-enrolment

• When recruiting new people, ensure you capture all of this information in your systems at the outset

Helpful links

www.thepensionsregulator.gov.uk/

www.parasolgroup.co.uk/for-recruiters/pensions-auto-enrolment-a-guide-for-recruitment-firms/

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