Many smaller firms which have not yet set up new auto-enrolment workplace pension schemes are in danger of underestimating the time and costs involved.

According to Cleckheaton and Keighley accountants Clough & Company, 40 per cent of business owners revealed that they believe the process will damage their business.

As part of the Government’s auto-enrolment programme, employers must offer and contribute towards a pension scheme, with smaller firms being phased into the programme until 2018 when it will become compulsory for all employers.

Initially, employers must contribute at least one per cent of an employee’s gross pay into a pension scheme for them and this will rise to three per cent by 2018.

Business software firm Sage recently found that two out of five small business owners expect cashflow problems as a result of auto-enrolment and are worried about the cost of introducing the schemes.

Lesley Kendrew, a partner at Clough & Company, said: “Time is quickly running out for any business that has yet to start planning for auto-enrolment because they will need to seek external advice about the process and compliance of the proposed scheme.”