Small firms could be hit with bills totalling tens of thousands of pounds if they fail to comply with their auto-enrolment duties on time, Standard Life warns.
New analysis from the provider lays bare the potential cashflow nightmare facing SMEs if they are late setting up a compliant auto-enrolment scheme.
According to the insurer, a company with 250 employees that is three months late meeting its auto-enrolment duties will face a bill of £34,000 on average for backdated employer contributions.
A firm with 100 employees in the same situation would have to pay over £13,000 in contributions, while a firm with 50 employees would need to cough up almost £7,000.
Standard Life head of workplace strategy Jamie Jenkins warns these costs could spiral further if The Pensions Regulator intervenes and uses its powers to force small firms to pay outstanding employee contributions.
He says: “If an employer is beyond three months late, The Pensions Regulator can force them not only to pick up the contributions they have missed but also the employees’ contributions.
“For a small employer that could cause a serious cashflow issue, particularly if the reason they have not complied in the first place is because they have run into financial difficulty. This could compound that problem.
“It is an issue we are worried about because we are still uncertain where employers due to stage this year are in terms of preparation.”
Jenkins says employers who miss their staging date and seek advice could also see their costs ramped-up as they are treated as “distressed purchasers”.
He says: “Anecdotally, employers who approach advisers late in the day to help them with auto-enrolment are being charged a lot more.
“That is understandable because advisers have limited capacity and to get a firm compliant in a short timeframe costs time and money.
“We have seen examples of fixed auto-enrolment fees increasing from £5,000 to £20,000 because the employer has become a distressed purchaser.”
Last month, Money Marketing reported concerns from a number of providers that auto-enrolment was at risk of “falling over” because up to a third of employers who should have set up compliant schemes in April and May have failed to do so.
However, The Pensions Regulator sought to allay these fears, saying predictions of mass non-compliance were “unfounded”.