People feel the pinch as auto-enrolment fines soar

The number of fines issued by The Pensions Watchdog for auto-enrolment non-compliance has rocketed. Here’s how to avoid falling foul of the law.

As predicted by many, the number of fines issued to employers by The Pensions Regulator for failure to comply with auto-enrolment regulations has escalated over the last six months. Fixed penalty notices were served to at least 198 companies in this year’s first quarter and, in some cases, the daily escalating penalty notices were enforced.

Those struck with escalating penalty notices predominantly staged between June and October 2014, and with penalties relative to the size of the firm, fines in the region of £2,500 each day the employer remains uncompliant.

This does not stop when business does; a bank holiday would cost a With a long weekend just around the corner, take a moment to reflect that a bank holiday costa a company £7,500 in additional to the cost of paying their payroll manager that weekend.

Throughout 2015, we can expect this trend to continue; since escalating fines Looking ahead through 2015, we can expect more fines, and as escalating penalties correspond with a firm’s size, those employing between 5 and 49 workers are looking to pay £500 every day they are not compliant. Though auto-enrolment awareness if growing, complacency levels are a concern, and there will be no exemption for employers because they haven’t understood.

It should be noted, excluded from this are those employers who don’t issue the appropriate communications after six weeks of staging, losing their right to postpone.

Considering the large amount of employers who fail to act within the three month period, the stage they are liable to uphold their employee’s contributions for the full missed period, on top of their own, fines are set to increase.

One reason for this is that although, to date, the regulator had the capacity to collaborate with employers in implementing a workable solution, given the volume of firms staging in 2015 and 2016, it’s apparent they will not be able to offer the same support levels in future.

‘Another stakeholder scenario’

Before the last six months, employers could, perhaps justifiably, see the fines as mere scaremongering: another stakeholder scenario. In reality, the low numbers are more likely owing to The Pensions Regulator prioritising constructive engagement with employers to attain the most favourable outcomes for workers.

The desirable timeframes and resources could be a thing of the past, and it falls to advisors to ensure employers fully understand that in this scenario, there is a price tag on failure. This will influence your guidance value regarding cost avoidance, together with value-add.

Ultimately, our best advice for both employers and advisors is to remember this: the cost of losing employer postponing capability from staging date, and, of course, liability for the entire cost of resolving incomplete contributions, can hit the employer with far greater net costs than a fixed penalty notice itself.