Many small employers remain unaware of their automatic enrolment pension obligations.
Automatic enrolment started in 2012 and is now halfway through a process which obliges every employer to automatically place their employees into a workplace pension scheme. But despite its success so far, there are concerns that the biggest challenges are yet to come.
More than five million workers have so far joined the scheme. But that figure doesn’t tell the whole story – as these are from the largest companies, only 3% of employers have so far automatically-enrolled their staff.1
The huge majority of employers are still to go through the process. Between now and 2018, over three million more workers will be enrolled by smaller employers.2 Ros Altmann, the government’s pensions minister, has warned, “It will be a much tougher ask to make auto-enrolment work for everyone.”
The worry stems from concerns that many ‘micro employers’ are unaware of their pension contribution obligations. Whilst similar to an employer’s responsibility to deal with National Insurance and Income Tax, many smaller employers remain confused as to their automatic enrolment duties.
Steve Moy, wealth management consultant at St. James’s Place, believes that the problem has been partly caused by the government’s inability to change the language used when dealing with businesses to allow the layman to understand it.
“Government advertising has been effective at letting employees know about the process, but we believe that more needs to be done to educate employers, particularly those employing just one or two people,” suggests Moy. “The language being used is still too complex and needs to be kept simple and jargon-free so that the average man on the street can understand.”
If you employ anyone, even just one person and pay them at least £192 a week or £833 a month, you will need to comply with automatic enrolment rules. Failure to follow the rules could lead to a £400 fine; and continued failure to comply has already resulted in daily fines of between £50 and £10,000 depending on the severity of the breach.
“There is a real danger of many people leaving it until the last minute before taking action,” comments Moy. “Micro employers should start preparing for automatic-enrolment now and be seeking professional advice in good time if they are unsure of their new responsibilities.”