I have a food production business with just over 40 employees. Costs have soared in the last couple of years and I’m really struggling to keep on top of things. To be honest, I’ve avoided even looking at pensions because it feels like just another expense I can’t afford right now.
I’ve heard about the new
auto-enrolment system coming in and I don’t know what I need to do or how much it’s going to cost. Is there any way around it, or do I just have to accept that this is another cost coming my way?
Answer: Yes, auto-enrolment (AE) is on a lot of people’s minds at the moment given its upcoming rollout date. Last week, we had a query from a worried employee about the impact on their monthly income, and now we hear the employer’s perspective.
Many business owners are still catching their breath after several difficult years. Rising input costs, tighter margins and hesitancy around raising prices have left little room for additional outgoings. Auto-enrolment will introduce another cost, but it’s important to understand what’s required, what options you have, and how best to prepare.
The system will be rolled out from 2026, so it is something you do need to be informed about and be ready for.
How auto-enrolment works
As discussed last week, under the new scheme, employees aged 23 and older who earn at least €20,000 per year and are not currently part of a pension plan, will be automatically enrolled. Both the employer and employee will make contributions, starting at 1.5% of gross pay and gradually rising to 6% by year 10. The State will also add a 25% top-up to the employee’s contribution.
Employees can opt out after a minimum period, but if still eligible, they’ll be re-enrolled every few years. Employers, however, cannot opt out – participation is a statutory requirement, and failing to comply can result in penalties or prosecution.
What this means for your business: from a compliance perspective, AE is relatively straightforward. The State will manage the funds and investments, and your payroll software will handle the deductions. However, there will still be a financial impact. Employer contributions, while phased in, will represent a new ongoing payroll cost.
For labour-intensive businesses like yours, this could significantly increase staffing costs over the next decade.
On the positive side, employer contributions are tax deductible, helping to offset some of the cost. Planning early and incorporating these contributions into your financial forecasts will make the transition easier.
Is there an alternative option?
Yes, while you cannot opt out, you and other employers have three options:
1. AE only: you can rely solely on the State-run AE system. It guarantees compliance and minimal administration, but offers limited flexibility – employees cannot retire early, and investment choices are standardised.
2. Occupational pension scheme: you could instead operate your own business occupational pension. This provides greater flexibility, tax relief for employees, and tailored benefits such as early retirement, higher contribution rates, or matched employer contributions.
It also sends a strong signal to skilled staff about the company’s commitment to long-term security. The drawback is greater complexity, but it is worth considering this option.
3. Hybrid approach: there is the potential to run a hybrid model. For example, an occupational pension for core, long-serving staff, and AE used as a “buffer” for seasonal or part-time employees. If your food production business hires seasonal staff, you may find that this option is best.
Figure 1.
Potential costs
So what could the cost be? This will depend on the route you take in relation to pensions for your employees. To give you a guide, we’ll use the example of an employee on €35,000 per annum.
Please see figure 1. above.
If you have 40 employees earning around that level, your business cost would start at roughly €21,000 per year, increasing as contribution rates rise.
While that’s a significant outlay, remember that employer payments are tax deductible. An occupational scheme may cost more or less depending on contribution levels, but it could also deliver stronger retention and morale benefits.
Andrew Brolly, senior accountant with ifac.
Andrew Brolly is fractional cfo with ifac, which is the professional services firm for farming, food and agribusiness.
I have a food production business with just over 40 employees. Costs have soared in the last couple of years and I’m really struggling to keep on top of things. To be honest, I’ve avoided even looking at pensions because it feels like just another expense I can’t afford right now.
I’ve heard about the new
auto-enrolment system coming in and I don’t know what I need to do or how much it’s going to cost. Is there any way around it, or do I just have to accept that this is another cost coming my way?
Answer: Yes, auto-enrolment (AE) is on a lot of people’s minds at the moment given its upcoming rollout date. Last week, we had a query from a worried employee about the impact on their monthly income, and now we hear the employer’s perspective.
Many business owners are still catching their breath after several difficult years. Rising input costs, tighter margins and hesitancy around raising prices have left little room for additional outgoings. Auto-enrolment will introduce another cost, but it’s important to understand what’s required, what options you have, and how best to prepare.
The system will be rolled out from 2026, so it is something you do need to be informed about and be ready for.
How auto-enrolment works
As discussed last week, under the new scheme, employees aged 23 and older who earn at least €20,000 per year and are not currently part of a pension plan, will be automatically enrolled. Both the employer and employee will make contributions, starting at 1.5% of gross pay and gradually rising to 6% by year 10. The State will also add a 25% top-up to the employee’s contribution.
Employees can opt out after a minimum period, but if still eligible, they’ll be re-enrolled every few years. Employers, however, cannot opt out – participation is a statutory requirement, and failing to comply can result in penalties or prosecution.
What this means for your business: from a compliance perspective, AE is relatively straightforward. The State will manage the funds and investments, and your payroll software will handle the deductions. However, there will still be a financial impact. Employer contributions, while phased in, will represent a new ongoing payroll cost.
For labour-intensive businesses like yours, this could significantly increase staffing costs over the next decade.
On the positive side, employer contributions are tax deductible, helping to offset some of the cost. Planning early and incorporating these contributions into your financial forecasts will make the transition easier.
Is there an alternative option?
Yes, while you cannot opt out, you and other employers have three options:
1. AE only: you can rely solely on the State-run AE system. It guarantees compliance and minimal administration, but offers limited flexibility – employees cannot retire early, and investment choices are standardised.
2. Occupational pension scheme: you could instead operate your own business occupational pension. This provides greater flexibility, tax relief for employees, and tailored benefits such as early retirement, higher contribution rates, or matched employer contributions.
It also sends a strong signal to skilled staff about the company’s commitment to long-term security. The drawback is greater complexity, but it is worth considering this option.
3. Hybrid approach: there is the potential to run a hybrid model. For example, an occupational pension for core, long-serving staff, and AE used as a “buffer” for seasonal or part-time employees. If your food production business hires seasonal staff, you may find that this option is best.
Figure 1.
Potential costs
So what could the cost be? This will depend on the route you take in relation to pensions for your employees. To give you a guide, we’ll use the example of an employee on €35,000 per annum.
Please see figure 1. above.
If you have 40 employees earning around that level, your business cost would start at roughly €21,000 per year, increasing as contribution rates rise.
While that’s a significant outlay, remember that employer payments are tax deductible. An occupational scheme may cost more or less depending on contribution levels, but it could also deliver stronger retention and morale benefits.
Andrew Brolly, senior accountant with ifac.
Andrew Brolly is fractional cfo with ifac, which is the professional services firm for farming, food and agribusiness.
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