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Pensions: Parasol reports 13% auto-enrolment opt-out rate

Pensions: Parasol reports 13% auto-enrolment opt-out rate

EMPLOYMENT services provider Parasol has revealed that just 12.8% of its career contractors have opted out of the company’s workplace pension scheme – significantly below original forecasts.

Founded in 2000, Warrington-based Parasol provides employment rights and benefits to skilled professionals in sectors such as IT, telecoms and engineering.  

When a contractor or freelancer joins Parasol they become an employee of the company, and as such are entitled to employment benefits – including access to a workplace pension.

Of more than 3,500 contractor employees automatically enrolled by Parasol to date under the new legislation, only 524 have opted out.

Derek Kelly, managing director at Parasol, described the lower-than-expected opt-out rate as a surprise.

He said: “We had originally anticipated an opt-out rate of around 50%, but like many major employers have been taken aback by the initial results.

“Inertia may be a significant factor, or it may be that our contractor employees have actively decided that their pension contributions represent a reasonable and affordable means of saving for their retirement.

“I think that if we look at the opt-out rate in three months’ time we may see a significantly different picture. However, for now at least, career contractors seem to be embracing pension auto-enrolment.”

As the UK’s largest professional employment organisation (PEO), Parasol’s auto-enrolment staging date for contractor employees was 1st April 2013.

Mr Kelly continued: “We have had a pension scheme for contractor employees in place for several years.

“This put us in a strong position when it came to meeting our obligations under auto-enrolment, as we simply had to adapt our existing processes.

“Prior to our staging date we consulted with the Pensions Regulator, NEST and various leading pension legal advisors with a view to creating the most robust solution possible.”

He added: “Auto-enrolment is prompting staffing businesses and their clients to review their supply chain and ensure that their providers are the true employer of record in the eyes of the law. 

“Recruiters and hirers need to be confident that their supply chain partners are fully compliant with auto-enrolment, and able to deliver everything required of them under the legislation.

“We feel we’re well placed to capitalise on this trend.”

Research carried out by Parasol forecasts that recruitment firms employing temporary workers on a PAYE basis could face an initial setup cost of at least &pound25,000, as they battle to get to grips with auto-enrolment.

According to Parasol’s modelling*, an agency with 800 workers earning an average of &pound18,000 a year on PAYE can expect a total year-one cost of around &pound111,242 from its October 2013 staging date if 30% of workers opt out.

If just 8% of agency workers decide to opt out, the projected cost – including initial setup – rises to &pound135,640.

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