Auto Enrolment: Penalties & PitfallsBack
Do you know how Auto Enrolment affects you as a business owner and employer? The Financial Management Centre has made a short video which explains how it affects you and what you have to do. We hope it will encourage you to act now and avoid risking any Auto Enrolment penalties.
During February 2016 the total number of workers saving into a workplace pension as a result of Auto Enrolment surpassed 6 million. In the first quarter of 2016 around 100,000 employers will have reached their staging date which is more than the total which have staged between October 2012 and December 2015. Over the next 2 years more than 1.5 million employers will also reach their staging date.
All employers are legally required to automatically enrol certain members of their workforce on to a workplace pension scheme and make minimum contributions to it. As a result doing nothing is not an option. The Pensions Regulator is warning employers that they need to plan ahead and understand what they must do in order to avoid the risk of fines for non-compliance.
Since Auto Enrolment started in October 2012 there have been 4,818 Compliance Notices issued, with 2,596 of those issued in the final quarter of 2015. Almost 1,600, £400 Fixed Penalty Notices of have been issued amassing almost £640,000. 1,021 of those penalty notices were issued between October and December 2015. As the smaller employers have started to fall into Auto Enrolment you can see the notable increases in non-compliance. In the third quarter of 2015 only 107 penalty notices were issued, meaning almost 10 times as many were issued in the fourth.
What if you don’t comply?
The Pensions Regulator is trying to guide and help businesses to comply with Auto Enrolment but is able to take action against those which are deemed to have wilfully failed to.
An initial minor breach such as not registering with the Regulator or not making contributions could result in one of the following statutory notices; Compliance Notice, Improvement Notice or Unpaid Contributions Notice. These are effectively a warning letter outlining the breach that an employer may knowingly or unwittingly have made and giving a timeframe for them to comply.
If one of the statutory notices is not complied with or if the Regulator has sufficient evidence of an employer breaching their obligations it can issue a penalty notice. This initially will be a fixed penalty notice of £400 which if not paid and the breach remedied or for more serious breaches could result in an Escalating Penalty Notice being issued. These fines range from £50 to £10,000 per day depending on the number of employees. A Civil Penalty Notice will apply if contributions have not been paid with fines of up to £5,000 per individual and £50,000 per organisation. Furthermore the Regulator can also make you pay any unpaid contributions.
If you fail to pay a penalty the Regulator can take legal action to recover it and if you still remain non-compliant you could face criminal prosecution and up to 2 years imprisonment.
Employees can anonymously report breaches to the Regulator using the online whistleblowing service, with a significant number of enforcement actions taken to date a direct result of employee whistleblowing. Encouraging employees to opt out of Auto Enrolment is an offence as is paying them to. A Prohibited Recruitment Penalty Notice will be raised if you are found to have a recruitment policy which does not comply with Auto Enrolment. This would include only employing staff if they agree to opt out and result in a fine of between £1,000 and £5,000.
Use the Pension Regulator’s penalty calculator to see what fines you could face if you don’t comply and fulfil your Auto Enrolment duties.
Auto Enrolment is not automatic for employers and yet so many still seem to be unaware of what they have to do or are simply avoiding it. Why not download our free Auto Enrolment guide or contact us for help and advice.
We have a low cost solution which means there are no complicated decisions to make and which manages the whole process for you and ensures you stay compliant and penalty free. Demand is expected to outstrip supply as more and more employers reach their staging date. Our advice is get ready now, get your workplace pension scheme set-up and then sit back until your staging date comes around. To check your staging date click here.