Ireland’s new auto-enrolment pension scheme is due to begin in just a few short weeks – and with the start date looming, employers are beginning to feel the pressure.
A number of recent reports suggest that while some are still struggling to prepare, others are bracing themselves for the financial impact of the scheme.
What is the potential financial impact of auto-enrolment?
A recent study carried out by FRS Recruitment suggests that the auto-enrolment (AE) scheme will have a significant financial impact on businesses around the country, particularly on those who did not previously offer a pension scheme to employees. In fact, 76% of Irish businesses believe that the new AE scheme will negatively impact profitability over the coming year.
The study also indicates that employers expect auto-enrolment contributions to add approximately €25,000 to their annual operating costs. To mitigate this, many are planning to increase prices and implement hiring freezes.
A lack of clarity for employees
Another area highlighted by the FRS Recruitment survey is a lack of clarity with regards to the impact of pension auto-enrolment on employees.
The study found that the majority of employees surveyed (59%) are confused as to how AE will work and are unsure of the impact this scheme will have on their take-home pay.
Employers should be mindful of how My Future Fund will impact their employees, and clear communications should be issued in advance of 1 January 2026 to avoid confusion. It’s also crucial that employees are informed of any changes made to the main terms of their employment and employment contracts.
What should employers do to prepare?
By the end of this year, there are several key steps that employers will need to have completed to prepare for pension auto-enrolment.
Check out some of our top tips for employers below:
- Assess your employee demographic: If you haven’t done so already, it’s critical that you assess how many of your employees are eligible for pension auto-enrolment and how many (if any) are currently signed up for your company pension scheme. This well help you to calculate the approximate cost of these contributions to your business, as well as preparing you for the administrative changes to come.
- Review and revise your HR documentation: It’s important that any changes made to an employee’s terms of employment are communicated clearly with the employee. Ahead of pension auto-enrolment, employers will need to update their employment contracts and any other relevant HR documentation to comply with the upcoming scheme.
- Update your internal systems: Your payroll systems will need to be assessed ahead of time, and payroll staff will need to be trained in how to manage the changes to come.
- Communicate with your employees: Many employees are unsure what pension auto-enrolment means for them. As an employer, it’s important that you inform relevant staff of the changes they may see in their pay packets next year. If you offer an occupational pension scheme, it’s also important to ensure that staff are fully aware of their options.