Sage, the accounting the popular software company, has issued warnings that thousands of UK SMEs could be caught off guard by what has been termed the auto-enrolment ‘blind-spot’ because of the new National Living Wage changes.
With only six months until the new National Living Wage changes come into effect, Sage is advising small businesses to make significant preparations as the auto-enrolment contributions for over one million employees is set to dramatically increase.
The changes to National Living Wage means that small businesses will need to budget for a wage cost of over £5,000 per employee.
Staff are eligible for auto-enrolment if that are more than 22 years of age, less than the state pension age, are primarily UK based and are earning over £10,000 per year. As of yet over 5 million UK professionals have been placed on the auto-enrolment pension scheme. Which is a scheme that is required for any workplace that has more than one member of staff.
Lee Perkins, managing director, Sage UKI, said: “Business owners are bracing themselves for the impact of increased staffing costs with the NLW.
The managing director of Sage UKI said that in his opinion businesses are ready for the increase in staffing cost but are not currently preoccupied with preparing for the impact that the, “increased pension contributions required for a tranche of employees that will be earning an additional £5,000”.
Overall this means that by October 2018 small businesses will have to contribute 3% of an individuals annual salary into the pension scheme.
Small business owners need to be aware of this unexpected cost and act as soon as possible. If you need help preparing for these unforeseen changes please speak to one of our payroll advisors. If you aren’t currently a client please take advantage of a free no-obligation consultation to find out more about these changes.