SMEs not ready for auto-enrolment, accountancy chief warns

Small business may not be able to afford the cost of auto-enrolment, according to the income president of accountancy body CPA Ireland.

Clodagh Henehan says the planned introduction of the compulsory workplace pension scheme next year could seriously impact the small and medium-sized business sector and needs to be planned and communicated carefully.

“This will be a major change for most SMEs. The fact that this legislation is currently working through the Oireachtas is not widely known or understood. The Government will need to ensure far greater information is made available to support SME roll-out of auto-enrolment for their staff.”

Auto-enrolment will see up to 800,000 private sector workers between the ages of 23 and 60 and earning above €20,000, who are not already signed up to a private pension scheme automatically signed up to a workplace pension scheme. It is designed to reduce the risk of pension poverty in old age.

The intention is for the plan to go live with the project at the start of next year, although there are growing concerns about whether the Government can meet this latest target in advance of an expected general election.

Ms Henehan noted that, as currently planned, auto-enrolment will add 1.5 per cent to the payroll costs of every SME in Ireland from January. This will rise in steps over 10 years to 6 per cent.

“Many SMEs with barely six months to go will not have planned for this and many may not be able to afford it,” Ms Henehan says. She warned that the practical impact on SMEs could be to reduce spending elsewhere, including hiring new staff.

“Others will be forced to fund pension contributions instead of making annual pay increments,” she said.

“No one doubts the need to take urgent action on Ireland’s pension crisis. However, this well-intentioned scheme is too radical an approach to railroad on to SMEs with less than six months’ notice. Failure to allow SMEs time to plan and adapt will result in either the failure of the scheme or the failure of some SMEs. The challenge is that stark.”

Ms Henehan, the 51st and probably the last head of an independent CPA Ireland, was elected at an AGM of the accountancy body in Dublin. She takes over as CPA – formerly known as the Institute of Certified Public Accountants in Ireland – works to conclude its proposed amalgamation with Chartered Accountants Ireland, which has now been approved by the members of both accounting bodies.

She described her top priorities as enhancing the attractiveness of the profession and ensuring SMEs, the backbone of Ireland’s economy, continue to be protected.

She has become the latest senior accountant to call for a review of the “out of date” Leaving Certificate accountancy syllabus and has also focused on the need for accountants to embrace technology, including AI, without allowing it to cloud the professional scepticism and critical thinking she says are necessary in the profession.

Ms Henehan, who trained with Clibborn & Co in Cork, has worked in public service roles for many years, most recently as a divisional manager for Cork County Council.