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The ‘hidden’ cost of auto-enrolment

Posted by
26 Nov 2014
I recently met with a client to discuss a recruitment need, and as we were discussing benefits within the compensation package he advised that because auto-enrolment was kicking in this year he was foregoing the usual pay increases that he gives to his staff. This intrigued me, particularly in light of recent reports that although auto-enrolment so far has been more successful than anticipated, salaries perhaps haven't had the increase that was expected.

The Chartered Institute of Personnel Development (CIPD) highlighted this point in a recent article. In a tough economy, where money is stretched thin, the initial impact of contributing to a pension can have a negative impact on some employee's. Particularly if the 1% employer's contribution means they opt to forgo any salary increase/review that year. Employees therefore, see a reduction in their salary from pension contributions where they might have potentially seen an increase instead.

From a recruitment perspective though the market is very candidate led. In order to attract the best talent, clients need to offer the best package available and although an additional pension might cost the business more money, it's important to remain competitive and offer market salaries if you want great candidates. As an employer, it's also important to remember that the role out will see all employees being offered the basic pension, and salaries need to remain competitive in spite of this. You don't want to lose your best talent to a company that doesn't restrict its pay increases because of an across the board pension benefit.

I am happy to report that this year has been a really positive one with regards to the volume of recruitment that we are seeing, companies are investing in permanent hires, and candidates are feeling confident enough to make a move from their current employer. Salaries however are still a challenge. I doubt that this is solely because of pension enrolment, but I am interested in hearing how auto enrolment has gone for businesses this year, and whether they have held back salary reviews as a result?

Do have an interesting insight into auto-enrolment? You can contact Laura by calling 01332 542580
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