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Rising Auto-Enrolment Penalties
July 13, 2016
The latest statistics regarding the number of employers not meeting their obligations show a dramatic increase in the amount been penalised, indicating a hard approach to compliance by the Pensions Regulator.
We ask; Should you be worried about this?
The Stats and Facts.
In 2015, it started to become clear that the Pensions Regulator (TPR) was using all powers at its disposal to enforce action concerning non-compliance with auto-enrolment by employers who had passed their staging dates. In the first quarter of 2015, 198 Fixed Penalty Notices had been submitted, more than what had been issued in the previously 2 and a half year since the introduction of auto enrolment. Further to this, in the first quarter of 2016 the number of penalties notices issued neared the number in the whole of 2015, with 806 Fixed Penalty Notices. During the same quarter, 96 Escalating Fixed Penalty Notices have been issued, with only 4 been issued in the corresponding quarter in 2015.
The message was set in stone – non-compliance will not be tolerated!
Penalties, Penalties and More Penalties..
On the surface, the increase in penalties can be attributed to the greater number of employers subject to auto-enrolment, with a monthly average of 7500 in 2016 in comparison to 3000 in 2015. However, this is deceptive as TPR doesn’t immediately issue penalties, meaning those issued in the first 2016 backdate to employers not meeting auto-enrolment obligations in 2015. This shows the major increase in the use of penalties. In addition, the increase coincides with the timetable of staging dates now reaching small and micro sized businesses who are either now or will shortly be required to comply with obligations under the Auto-Enrolment scheme.
The Penalty Notices could have a severe impact on small businesses with fines of £50 per day, or £500 per day for companies with 5-49 staff. However, the TPR have been clear about using their enforcement powers to encourage remedial action to avoid fines through early engagement when first identified. If the employer fails to respond or communicate, then a sanction will ensue.
The Warning Signs
From the staging date (the auto-enrolment start date), companies have five months to send a declaration of compliance confirming that all of the auto-enrolment obligations have been met. If this is not completed, the company will be sent a compliance notice. Further to this, it has been recognised that smaller employers have been leaving things until the last minute forcing the TPR to use £400 penalties as a ‘nudge’ to encourage compliance. Rejection or lack of response to this will result in the daily penalties been imposed.
The TPR have explained that the early really is the better, stating that it aims to offer advice over issuing penalties. Therefore, contacting the TPR could save the company from a fine. In regards to employees, the TPR have advised transparent communication between them and the company to avoid employees bringing up issues with TPR if they are been affected by any problems been experienced with auto-enrolment.
Swindon Town Football Company Limited were recently issued with fines totalling over £22k after it failed to put eligible workers into a pension scheme or comply with other workplace pension duties. The Club were issued with a compliance notice in August 2014, directing it to automatically enrol staff and pay contributions, but it failed to comply by the deadline of 17 October 2014. The Pensions Regulator stated that "there were several further delays in the employer complying with their duties, and as a result TPR’s intervention escalated from a focus on remedial action to one of enforcement action."
The Pensions Regulator acknowledges that many smaller employers appear to be leaving things until the last minute, and as a result they are using fixed penalties of £400 as a "nudge" to encourage compliance. If an employer does not take action in response to this, or actively engage with the Pensions Regulator to remedy the situation, then the risk of escalating daily penalties being imposed looks highly likely.