"As a smaller employer, I see engagement as an investment, rather than an expense," says AHC's Peter Nicholas as he discusses this year's focus for SMEs: auto-enrolment.
This is my second UK winter. I'm still adjusting to spending Australia Day indoors, rather than around the BBQ. Wherever you are, January forces a degree of focus on the year ahead. For many smaller UK employers, the focus will turn to auto-enrolment.
It's easy to see why small and medium enterprises (SME) might see auto-enrolment simply as a compliance exercise. But I think it's an opportunity for employee engagement that should not be missed.
Auto-enrolment makes pensions a standard workplace benefit, just like sick leave and annual holidays. This means pensions will play an increased role in the total benefits package, especially as contribution levels increase.
UK employers can learn from the Australian experience. In Australia, high pension contributions are compulsory and funded totally by the employer. However, employers have largely divorced themselves from their employees' retirement planning process. Pension payments are seen by employers as an employment overhead, like National Insurance. In hindsight, this has reduced the level of engagement between employer and employee over a substantial proportion (9% and climbing) of their pay. In my view, it's a lost opportunity.
By engaging with their employees about pensions early in the auto-enrolment process, the smaller employer in the UK will be in a better position long-term. Having a good pension plan enhances an employer's reputation when competition for talent intensifies. Engaging with employees about retirement plans makes for better workforce planning. As a smaller employer, I see it as an investment, rather than an expense.
How can an SME invest in employee engagement around pensions in a way that is useful, but cost-effective? To be effective, any engagement strategy must be user-driven and accessible to employees in a way that allows them to help themselves. The best way to provide this support at a low cost is to offer online tools that educate, help decision making and allow for personalisation by each employee. This has the best chance of connecting with the employee where they are in their working lives and retirement journey.
So yes, the current short-term focus in pensions for SMEs is completing the auto-enrolment transition and fulfilling legal obligations. But when employees receive their letter, I see it as only the beginning of a long-term role for pensions within the employee-employer relationship. For employers, the opportunity to start investing in engagement about pensions, as part of the overall employment package, is now.
Written by Peter Nicholas, managing director/CEO, AHC
peter.nicholas@ahc.com
