The auto-enrolment pension scheme could prove “a significant operational and financial burden on small retailers,” the Association of Convenience Stores has warned.

Under the scheme, which started being rolled out by the government in 2012, all staff must be enrolled in a pension when starting employment unless they opt not to. Most c-stores will begin to enrol their staff next June.

Employers will be required to pay 1% of employees’ annual salary into the pension scheme. This rises to 3% by 2018.

“Retailers are facing increased costs in many areas of their business, including above-inflation increases in the minimum wage and changes to statutory sick pay regulations,” said ACS CEO James Lowman.

“Auto enrolment has the potential to be a significant operational and financial burden on small retailers, and we are keen to work with the Department of Work and Pensions to minimise the costs of implementation while ensuring that all retailers are aware of what is required.”

In its submission to the Work and Pensions Select Committee, the ACS said nearly half of micro employers did not know the exact date when they needed to comply, leaving them at risk of financial penalties because of non-compliance, and disproportionately affecting the smallest businesses in the convenience sector.

It also said the high administrative cost of dealing with very small pension contributors meant pension providers were more likely to reject smaller employers.