The Pensions Regulator (TPR) has issued its first fines to employers for failing to meet auto-enrolment duties.
It has issued three fixed penalty notices were issued, each levying fines of £400 on employers, according to the TPR’s latest automatic-enrolment Compliance and enforcement bulletin.
TPR has not revealed details of the nature of the breaches resulting in fines.
Employers could have failed to either comply with an unpaid contributions notice or a compliance notice.
The bulletin, which covers April stagers, saw 163 compliance notices issued giving employers a deadline within which to take actions.
In the same period, the regulator issued eight demands for information and documents on pension schemes.
According to a Freedom of Information request by Creative Auto Enrolment, in October, the number of investigations into auto-enrolment compliance by TPR that result in potential and actual breaches has more than doubled this year, increasing from 23% to 47% since January
Charles Counsel (pictured), executive director for automatic-enrolment at TPR, said: “We know most employers want to do the right thing and comply with the law. Where we take enforcement action by issuing a compliance notice, this gives employers the necessary wake-up call to provide the pensions their employees are due.
“As we deal with smaller employers, we will see more which, despite our message to prepare early, leave it too late or do not comply at all. This type of non-compliance is not acceptable. We expect to see the number of times we need to use our powers increase.
“It’s been two years since the first employers automatically enrolled their eligible workers into a workplace pension.
Sign up to our newsletters
Receive news and guidance on a range of HR issues direct to your inbox
“In that time, more than 4.7 million workers have been put into a workplace pension scheme by their employer. That’s millions of people who have begun saving thanks to automatic-enrolment. More than 33,000 large and medium employers have complied with their duties.
“But we are not complacent. More than 1.25 million employers need to comply with their new workplace pensions over the next three years. For all these employers, it is vital that they find out their staging date now, and plan early to ensure that they are ready in time.”
We are not surprised about these fines as we have been warning businesses they must meet their auto-enrolment obligations or face the consequences – simply they have no choice but to comply or pay the penalty.
Unfortunately, a number of employers are still not engaging with their professional advisers to tackle their obligations. The Regulator has the powers to act and we have now seen it has imposed the first fines and more will follow if the warnings are ignored.
As more and more employers reach their auto-enrolment staging date, these figures represent what is likely to be a continuing upward trend across the UK business landscape.
These findings also suggest that efforts from TPR and the government to communicate the auto-enrolment message to employers are simply not getting through.
Every employer throughout Britain should see this as an urgent wake-up call, to ensure they are not left behind in an increasingly complex pensions market. Whether you’re an SME approaching your staging date, or a large corporation heading towards re-enrolment, our advice is to avoid complacency and act now.
With legislative changes such as alterations to defined contribution pensions already reshaping the landscape, it is essential that firms conduct a thorough audit of their scheme in order to remain compliant.
I think this is just the tip of the iceberg for employers, who now face mounting pressure from the governing authority to avoid breaches and ensure the ongoing auditing and compliance of qualifying pensions.
We welcome the Pension Regulator taking action to ensure the auto-enrolment legislation continues to be successful, although suspect this will simply be the tip of the iceberg. These results are based on the compliance of firms with upwards of 150 staff. It is typical that employers of this size will have well-resourced HR and Finance Teams to look after the auto-enrolment project.
The staging dates of employers with staff of 61-89 staff on the payroll (as at 1st April 2012) occurred during the period. These companies are less likely to have the resources internally to dedicate sufficient time to the auto-enrolment project and so we could see an increase in the issuing of fines and compliance notices moving forwards.
Fast forward to the middle of next year and firms with less than 30 employees begin their auto-enrolment journey, non-compliance is therefore likely to be far more commonplace.
Whilst only three penalty notices (and 163 compliance notices) have been issued, the fact that penalty notices have been issued already demonstrates that the Regulator is not afraid to show its teeth when it comes to enforcing the complex legislation which will eventually impact all employers in the UK. Employers need to wake up to the fact that dragging their heels on complying with auto-enrolment could lead to negative consequences including substantial fines.
The Regulator has just launched (on the 20th October) an advertising campaign focussing on employers (some commentators argue that this is where the focus should have been from the start). It remains to be seen whether this will lead to a reduction in the proportion of staging employers who receive compliance notices and penalty notices.
The news that three businesses have been fined for not complying with auto enrolment demonstrates a shocking, but unfortunately not surprising, number of employers failing to successfully handle the process.
We knew it was just a matter of time before these penalties were issued and it highlights what we’ve said time and time again – that employers are finding auto enrolment a real challenge and that government communications have simply not been good enough to give employers the helping hand they need.
We are delighted that the government is now strengthening its communications, with its new campaign talking directly to the employers that need to implement this law. We will watch with interest to see the effect of this new campaign but in the meantime we are urging small businesses, and the advisors working with those firms, to ensure auto enrolment is firmly on their radar.
With TPR able to enforce the payment of backdated employer and employee contributions, these penalty notices are often just the tip of the iceberg when it comes to the financial impact of failing to comply with auto enrolment.
This shows the regulator is prepared to enforce compliance. It sends a warning shot that ALL employers must give adequate time to prepare for auto enrolment.
It is also apparent that employers are ill-prepared and simply do not realise the time and resource burden auto enrolment is placing upon them.
Communication from the regulator is simply not good enough and we have had many instances of continued hand holding with our clients through the process.