As many as 20% of smaller firms would axe staff if forced to contribute towards the pension pots of their employees, new research suggests.
A survey from the British Chambers of Commerce (BCC), questioning 800 businesses, 75% of which employ fewer than 50 employees, finds 35% of employers would ‘freeze salary increases’ to pay for compulsory contributions, while three out of ten respondents would pass the cost onto customers.
BCC's research finds 57% of employers do not provide pension contribution facilities for their workers, due to cost issues. Most of those not providing pensions are in the group of businesses with fewere than 50 employees.
Just over half of all employers questioned say an additional government incentive, such as an additional tax/NI allowance for money spent on pension contributions, might serve as a tool for persuasion.
BCCdirector general David Frost says the report indicates the negative outcome facing employers if forced to contribute towards pensions. It would increase the cost of employing staff, with some firms having to reduce their workforces in order to meet such a requirement.
Frost says: “When it comes to pensions, cost is a real issue for many firms, particularly small and medium-sized businesses (SMEs). Indeed, more than half of firms that do not currently offer a contribution say that such a move could persuade them to do so.”
The report follows calls by the ABI for increased responsibility on employees to get individuals to save, including automatic enrolment by workers into their company pension schemes.
According to the ABI, a modest contribution of 3% by both employers and workers to a scheme would see an overall pension saving increase of £4.2bn a year.
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