Now that Automatic Enrolment into Workplace Pension schemes has finished its rollout and applies to businesses of every size, The Pensions Regulator are carrying out audits to ensure that business are meeting their responsibilities.
Further to this, they are actively fining businesses that aren’t complying with legislation regardless of that business’s size.
What fines can be issued?
If you aren’t complying with your legal obligations, then The Pensions Regulator can impose anything from a £400 fixed penalty to a daily escalating penalty that can range from £50 to £10,000.
The Pensions Regulator have a range of investigative powers. Beyond requesting voluntary information from you, they can also issue formals notices and inspect your premises. If necessary, they can involve to courts to ensure their investigations are conducted.
If you feel your penalty notice shouldn’t have been issued, you have the right to appeal against it provided it is within 28 days of you receiving your notice. You can find out how to apply for a review here.
How are Automatic Enrolment laws enforced?
Fines aren’t the immediate solution sought by The Pensions Regulator. Typically, you may face any of the following:
- Warning letter with a deadline for you to meet your legal duties
- Statutory notice telling you to comply and pay any outstanding contributions
- Penalty notice addressing any failure to comply or breach any part of your obligations
- Fixed penalty notice of £400 if you don’t comply with statutory notices or there’s evidence you breached the law
- Escalating penalty notice with a new deadline. If this is also missed, you’ll be fined at a daily rate of £50 to £10,000 which will continue to grow at a daily rate
- Prohibited recruitment conduct penalty notice for breach of or failure to comply with a prohibited recruitment conduct compliance notice. You could be fined between £1,000 and £5,000 depending on your number of staff
You can pay most penalty notices online, but please note that this doesn’t apply if your notice reference starts with AE. In this case, you’ll have to follow the instructions on the notice itself.
Under extreme circumstances, The Pensions Regulator do have the power to prosecute employers who wilfully disregard their duties – such as refusing to put employees in a pension scheme or knowingly providing false information. Prosecution can result in up to two years in prison.
How likely is a fine?
An update published last month reported that 27,219 compliance notices were issued between April and June of this year, the most in any 3 month period.
Aside from the higher the usual number, this update also marks the first time The Pensions Regulator have used some of their powers (detailed above) to deal with pension scams, scheme valuations and failure to comply Automatic Enrolment.
Automatic Enrolment: a quick refresher guide
As it’s been a while since Automatic Enrolment was in the news, here’s the facts you need to know.
As of 2018, employers are legally required to provide and contribute towards a pension scheme for each of their employees that:
- are aged between 22 and the State Pension age
- earn at least £10,000 a year
- work in the UK
The amount you contribute is based on your employee’s total yearly earnings between £5,876 and £45,000 (before tax). Total earnings include salary and wages, commission / bonuses, overtime, statutory sick pay and statutory maternity / paternity / adoption pay.
Currently, you’ll have to contribute a minimum of 2% of these total earnings. Each employee will have to contribute 3% for a total of 5% contributions.
In April 2019, these contributions will rise. You’ll have to contribute a minimum of 3% and employees will have to contribute a minimum of 5% for a total of 8%.
How KashFlow can help
KashFlow Payroll offers a complete, end-to-end solution for Auto Enrolment in small businesses.
Our online payroll software includes a pension scheme setup wizard that includes postponement and deferrals, which means adding employees to your pension plan is a painless process.
Further to this, we’ve also automated assessment in each payroll run so that eligible employees are enrolled and contributions are calculated as needed.
Our payroll software also generates the output files required by you chosen pension provider(s) and automatically generate the communications needed for each employee to help you stay compliant in your reporting.
To see how KashFlow Payroll can help you stay compliant and meet your Auto-Enrolment obligations, start a free trial or give us a ring on 0330 0574204 for a chat.