An interesting statistic from The Pensions Regulator popped into my inbox a couple of weeks ago. 1,529 Compliance Notices have been issued to date against employers who failed to comply with their automatic enrolment duties.

The Pensions Regulator (TPR) also reveals that medium, small and micro employers are more likely to leave automatic enrolment preparations until closer to – or even after – their staging date. They expect this number of compliance notices to rise significantly.

So what does it mean if your business gets a compliance notice?

Compliance Notices

Under section 35 of the Pensions Act 2008, a compliance notice gives TPR the power “to remedy a contravention of one or more automatic enrolment employer duty provisions.”

Most employers want to do the right thing, and as far as auto-enrolment goes TPR acknowledges that there is some confusion amongst employers about what their duties are. Therefore, there is a focus on educating employers and working with them to help them comply, rather proceeding straight to more stringent enforcement actions.

These are the enforcement actions available to TPR:

  1. Informal action: Guidance and instructions might be issued over the phone, email, letter or in person. Stepping it up a gear, a warning letter might be sent confirming a set time frame for compliance with the duties.
  2. Statutory notices: These can direct the employer to comply with their duties and / or pay any contributions missed or are late in paying. Further discretionary powers allow TPR to estimate and charge interest on unpaid contributions.
  3. Penalty notices: These may be issued for persistent or deliberate non-compliance. A fixed penalty notice will be issued if you don’t comply with statutory notices, or if there’s sufficient evidence of a breach of the law. This is fixed at £400 and payable within a specific period.

TPR can also issue an escalating penalty notice for failure to comply with a statutory notice. This penalty has a prescribed daily rate of £50 to £10,000 depending on the number of staff you have.

A civil penalty can be issued for cases where the employer fails to pay contributions due. This is a financial penalty of up to £5,000 for individuals and up to £50,000 for organisations.

Prohibited Recruitment Conduct Penalty Notice: This can be issued if employers fail to comply with a compliance notice or there is evidence of a breach. This penalty has a prescribed rate of £1,000 to £5,000 depending on the number of staff the employer has.

The Pensions Regulator states that, “We aim to fully recover all the penalties that we issue.”

Complying With Auto-Enrolment

One key aspect of auto-enrolment that employers do not always understand is that their duty is not just to automatically enroll staff meeting the age and earning criteria for eligibility. There are also two other categories of staff:

  1. Staff with a right to join a pension scheme
  2. Staff with a right to opt in to an automatic enrolment pension scheme

This means that staff on your payroll earning under £486 gross per month, and 16 yrs old and over, have the right to join a pension scheme. Those earning over £486 and up to £833 p/m have the right to opt into an automatic enrolment pension scheme.

The Pensions Regulator has a step-by-step guide to auto-enrolment that will take you through the process, and highlight those issues that perhaps you haven’t considered. They also recommend that you allow 12 months to prepare for auto-enrolment, which may seem a little late for those of you who’s staging date falls within this period.

However, as previously explained The Pensions Regulator is sympathetic to those employers with good intentions to comply, and therefore will work with them to help you do this.