A third of law firms are unsure how to handle the ‘tricky issues’ of compliance and administration surrounding auto-enrolment, the government scheme requiring employers to move workers into a pension plan, according to a survey.

Failure to introduce a compliant scheme by your staging date will be a criminal offence attracting a fixed penalty of up to £50,000.

Auto-enrolment is being phased in between 2012 and 2016, and all employers with fewer than 500 staff should have received their staging date. It will apply to employees aged between 22 and retirement age earning more than £8,105. Employees can apply to opt out of the plan.

Employer contributions are also being phased in, rising to 3% from 1 October 2018.

David James, an associate solicitor at City pensions firm Sackers, explained that the government set up the auto-enrolment scheme to ‘nudge’ people to begin a pension plan for what is likely to be a long retirement. The alternative, James said, is the ‘pensions timebomb’ of people living longer, but without the income to live on.

James warned that there are ‘tricky issues around the edges’ of the new pension requirements.

‘To avoid penalties, firms should set aside time to prepare a plan and put it in motion to identify who, by law, must be enrolled on a scheme and how to communicate with them. Are partners employees or are they self-employed? How about independent contractors, or people who are British but working overseas, or support staff?

‘It’s essential to get it right because the government will check that firms are complying and there will be sanctions for non-compliance.’

All firms need to prepare by budgeting for the additional costs of employer contributions and dealing with staff queries, upgrading payroll systems, collecting and paying over contributions, and retaining the required records, he said. Clients are also likely to look to firms for advice.

The 10th annual Employee Rewards Watch Survey, from Thomsons Online Benefits, questioned 505 HR and finance professionals across a range of sectors.