Auto-enrolment penalties for noncompliance

All businesses need to launch workplace pensions schemes by their staging date, and failure to comply can result in fines and penalties. During the 2015/2016 tax year, the Pensions Regulator issued thousands of fines to companies that failed to comply with setting up their pension schemes.

The government has made it mandatory for businesses to set up workplace pensions schemes and auto-enrol their qualifying employees. All large companies should have already launched their pensions schemes. Small to medium companies were sent a letter from the Pensions Regulator detailing the date by which they were required to have their workplace pensions schemes up and running. This date is known as the staging date, and companies were given plenty of notice to give them time to set up their schemes.

Most businesses have set up their pensions schemes by their staging date, but some have not. The Pensions Regulator has revealed that a number of companies received fines and 153 were issued with county court judgments (CCJs) for non-payment of their fines.

Informal talks

If a business misses its auto-enrolment deadline, it should contact the Pensions Regulator for informal talks. The Pensions Regulator will help business formulate a plan for quickly setting up their pension scheme. A letter providing a specific time to complete the plan will be issued, and all contributions to an employee’s pension fund will be backdated from the original staging date.

Statutory notice

If a scheme has still not been set up, then a formal statutory notice will be issued. The Pensions Regulator could charge interest on the unpaid contributions at this stage.

Penalty notices

The Pensions Regulator can then issue penalty notices that range in severity. The first level is a fixed fine of £400.

An escalating penalty notice is a daily fine of between £50 and £10,000 a day that depends on the number of employees. A firm employing 1 to 4 employees can be fined £50 a day. This rises to £500 a day for 5 to 49 employees and £2,500 a day for 50 to 249 employees. These daily fines can soon add up to considerable sums.

The next stage is a civil penalty notice, which is £5,000 for individuals and £50,000 for an organisation.

A prohibited recruitment penalty notice imposes fines from £1000 to £5,000.

Failure to pay fines can result in CCJs. As well as costing businesses a lot of money, a CCJ can seriously damage the credit rating of a business.

How to avoid penalties

The obvious way to avoid penalties is to comply with the Pensions Regulator requirements. Many business owners procrastinate on setting up pensions schemes because the process appears complex.

You could outsource the process to a firm that can set up a scheme for you, then take control of your payroll systems so that contributions are collected accurately and on time.

If you have not yet set up your company’s pensions scheme, talk to a pensions expert here at Endeavour Financial Planning, who can explain how to set up a workplace pensions scheme.

Auto Enrolment advice is not regulated by the Financial Conduct Authority.

Sources used: https://www.autoenrolment.co.uk/knowledge-bank/penalties https://www.moneymarketing.co.uk/pensions-regulator-hits-150-firms-auto-enrol-sanctions/ https://www.brightpay.co.uk/guides/What%20happens%20if%20you%20don’t%20comply%20with%20Auto%20Enrolment.pdf