Employer fined more than £10,000 for auto enrolment failings

By Jamie Clark, Business Development Manager

We take a look at the Pensions Regulator’s latest auto enrolment compliance bulletin and the lessons that can be learned from it.

With up to half a million smaller employers expected to reach their staging date during 2016, it’s likely that the Pensions Regulator (and the rest of the pensions industry) will be a bit busy. In its latest compliance bulletin, the Regulator sets out its compliance action so far and how it intends to communicate with smaller employers and their advisers.

Compliance so far

It’s fair to say that there has been a considerable increase in compliance action. According to the Regulator, of the 1,594 fixed penalty notices issued since the start of auto enrolment, 1,021 were issued in the last quarter of 2015.

And, somewhat worryingly, of the 31 escalating penalty notices issued since 2012, 24 were issued in the last quarter of 2015. These figures are only likely to increase.

RL-AE-graphic-1-March

Getting the message across

The Regulator says that while many employers want to do the right thing, smaller employers are more likely to leave things until the last minute. As a result there has been an increase in the number of compliance notices issued. Lots of employers then complied but some smaller employers didn’t sort things out until after they were issued with a fixed penalty notice of £400.

The Regulator, together with the DWP, intends to continue to get the message across to small and micro employers* through various channels such as by letter, TV and radio advertising, and social media. So far, the Regulator reckons that their communications plan has been a success, citing that 90% of the first 12,000 small and micro employers have complied.

Spotlight on advisers

Research conducted by the Regulator suggests that the majority of smaller employers will contact an adviser for help and advice. As a result, the Regulator has developed targeted communications for the business adviser audience.

Among other things, it has a dedicated area on its website, is advertising in trade publications, and is engaging with professional bodies – all designed to help business advisers help their clients with auto enrolment.

Escalating penalty case

One case focuses on an employer who didn’t do anything about auto enrolment until after their staging date. The Regulator subsequently issued a compliance notice requiring them to pay both the employer and employee contribution arrears. They failed to comply so were then issued with a £400 fine.

Eventually, the employer appointed an adviser but by then they had incurred a fine of £10,000 (£2,500 per day for four days). So all in all, by failing to comply this employer incurred unnecessary costs of around £25,400 – made up of a £400 fine, a £10,000 fine, and around £15,000 in employee back contributions.

The challenge ahead

The sheer number of employers due to stage this year is more than all the employers who have staged so far. Some might say that this is the real test for auto enrolment and the adviser and provider markets that can help so many smaller employers. We should continue to try and help as much as we can. Please see our auto enrolment proposition for more details.

Notes:

* A small employer is defined as one with less than 50 workers. A micro employer is defined as one with less than 10 workers.

Source:

The Pensions Regulator, Automatic enrolment Compliance and enforcement Quarterly bulletin 1 October – 31 December 2015.

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. AE Project Fear? Is this an advertising copy? I’ll bet this wasn’t small firm. Fine a small firm this amount and you risk them going into liquidation. So no pension AND no job. If there are sufficient numbers of small and micro firms not complying there isn’t really that much the Regulator can do about it – that is if they wish to safeguard jobs, rather than pensions.

    • It would appear you are suggesting that small companies should not need to comply with the law (irrespective of what you think of the law itself) for fear of them going out of business and losing the jobs. Do you apply the same logic to minimum wage, health and safety, or the sale of restricted items?

      It would seem to me that while the example may be manufactured / selected very specifically to draw attention (let’s be charitable) it shouldn’t detract from the main message which is that employers must provide pensions, and that rule is being enforced so why not sort your house out before you get fined.

  2. Take The High Road 22nd March 2016 at 8:05 pm

    I would say that a £15k back contribution is unlikely to make this a small/micro employet so it is most probably just project fear!!

  3. This is very misleading, Jamie Clark is not a journalist or work in any capacity for Money Marketing, he is a BDM for Royal London and the article has been cut straight from their website – selling their services!??

  4. I have a micro company employing 3 people on less than £18k. I had a letter concerning a fine which I offered to pay. I was told today that the fine is now £4,000 plus back payment within one week plus £500 per day additional fine. I will have to close the company if this is enforced. So, to the comments suggesting that it is fair, try running a business with integrity with this bollocks. I have not had a wage for three months because of trade. F*** them, I’ll give up rather than pay them. Don’t ever start your own business as this is what you get.
    PS F*** off Conservatives, you have lost my votw

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