Two-thirds of UK workers are now saving through workplace pensions, thanks to automatic pension enrolment, but seven in 10 employers are feeling the impact in cost terms.
While the focus must remain on encouraging employees to save into a workplace pension, 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.
This is according to the latest Employee Outlook: Focus on employee attitudes to pay and pensions from the CIPD, the professional body for HR and people development. The survey of more than 2,000 working adults finds that two-thirds (66%) of employees are now saving through a workplace pension scheme, up from the 45% recorded in 2010. This figure increases to 74% if those earning less than £10,000, who are not eligible for automatic enrolment, are excluded.
However, 70% of employers who have gone through automatic enrolment noted the financial cost on their organisation. The most common reactions to these costs include taking lower profits/absorbing costs, (21%) paying the statutory minimum pension contributions for automatically enrolled staff, (15%) reducing or stopping wage growth (10%) and reducing other elements of pay (10%).
One way of being able to increase pension contributions without cutting back on other parts of the payroll is if employers are able to improve their productivity. Indeed, among the 32% of employers that increased salaries by more than 2% in 2015, 28% were able to do so through productivity improvements. However, so far, just one in eight employers (12%) have actually taken steps to review working practices and job design in order to increase performance and this figure is much less (8%) for small businesses.