Employers count cost of pensions as enrolment rises: CIPD

Reviewing working practices for productivity gains could help employers better manage workplace pension costs, especially as the National Living Wage nears, says the CIPD.

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According to a new study by the professional body for HR and people development, two-thirds of UK workers are now saving through a workplace pension scheme. Yet seven in ten employers are feeling the impact in cost terms. This is leading the CIPD to call for stability rather than "rushed" change on pensions taxation changes in the upcoming March budget, and for employers to look for ways of improving working practices.Encouragingly, the survey of over 2,000 working adults finds that sixty-six per cent are now saving through a workplace pension scheme, up from the 45 per cent in 2010. This increases to 74 per cent excluding those not entitled to automatic enrolment.However, 70 per cent of employers surveyed for the Employment Outlook: Focus on employee attitudes to pay and pensions study that have gone through automatic enrolment noted the financial implications. The most common responses to the cost of complying with pensions roll-out include taking lower profits/absorbing costs (21 per cent), paying the statutory minimum pension contributions for automatically enrolled staff (15 per cent), reducing or stopping wage growth (10 per cent) and reducing other elements of pay (10 per cent).While the focus must remain on encouraging employees to save into a workplace pension says the CIPD, the pressure is on for employers to improve productivity before other elements of the reward package and profits suffer, particularly as the introduction of the National Living Wage approaches.Charles Cotton, CIPD performance and reward adviser, comments, "Many pension commentators have suggested that workers and firms aren't paying in enough to their workplace defined contribution schemes, but this research encouragingly shows that most employers and employees are contributing well in excess of the minimum rates required under automatic enrolment."Finding ways of enhancing workplace productivity is one way employers can increase pension contributions without cutting back on other parts of the payroll, suggests the CIPD.According to its study, of the 32 per cent of employers that increased salaries by more than 2 per cent in 2015, 28 per cent achieved this with productivity improvements.However, so far, just one in eight employers (12 per cent) have actually taken steps to review working practices and job design in order to increase performance, and this figure is much less (8 per cent) for small businesses. "While many ways of boosting performance may now only be marginal, especially in sectors subject to legal requirements, if employers can make enough small changes, then they can really boost their productivity," adds Mr Cotton. "What all employers need to do is review the way their organisation operates and identify the areas where improvements can be made, before deciding the task is too great."However, employers are clearly taking a hit and this is likely to become more of a problem as the introduction of the National Living Wage in April and the Apprenticeship Levy in 2017 edge ever closer."Looking ahead also to Chancellor George Osborne's March budget, Mr Cotton commented on the likely impact on employers of possible changes to future pensions contributions taxation, warning this will add an extra administrative and financial burden."Taxing pension contributions or introducing a single rate of tax relief would result in a significant administration and cost headache for many employers. If changes have to be made then they should come in after 2018 as auto-enrolment will be complete and organisations will have had time to measure and respond to the impact of these other new initiatives."Employers need to be protected too, so for the moment it's better to stabilise, rather than rush through changes that will put unnecessary strain on many organisations."

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