Small businesses that have failed to implement pension reforms now face fines.
Britain’s pension revolution is well underway, but the implementation of auto-enrolment in Britain’s workplaces remains an under-reported and overlooked aspect of the recent changes. Although all businesses must enrol their workforce into a qualifying pension scheme, many have yet to take action following the introduction of the changes in October 2012. Now, thousands of small businesses are believed to have missed the legally binding deadlines to introduce occupational pensions for employees and, as a result, face the prospect of expensive penalties.
The Pensions Regulator has now moved to clamp down on non-compliant businesses and started to issue fines at the end of October. City law firm Irwin Mitchell, in a recent survey, suggests that a significant number of the 12,000 businesses with 62-89 employees failed to meet their 1 July deadline to implement auto-enrolment, and have requested a three-month extension. Subsequently, many of these have also missed October’s final cut-off date and are now liable for fines.
Furthermore, research carried out by the regulator in September revealed that 20% of small employers and 50% of micro-employers – those with only a few employees – have no idea of the date of their deadline. Although the fines for non-compliance are potentially substantial, it seems that large numbers of smaller businesses have not yet acknowledged the scale of the challenge and the potential cost of failure.
The Pensions Regulator checks fulfilment by comparing PAYE with auto-enrolment data, and can issue compliance notices, penalty notices and fines for those failing to adhere to the rules. The fixed penalty for non-compliance is £400 followed by daily penalties of between £50 and £10,000, depending on the number of employees.
Preparation and planning is crucial for all employers who want to understand and determine the impact these new measures will have on their businesses. The work of sourcing a scheme provider, establishing administration systems, consulting employees and compliance with the regulations can be a very lengthy process. So much so that employers are advised to allow a period of 12 months to prepare.
Ian Price, Divisional Director at St. James’s Place, says the numbers of small businesses caught up will increase significantly, “We’ve just hit the second anniversary of auto-enrolment but up until now only larger employers have been involved,” says Price. “More than 1.25 million smaller employers need to comply with auto enrolment over the next three years, so we haven’t seen anything yet in terms of sheer volume. Even the smallest businesses could be affected so it’s vital that they seek professional support if they’re unsure how to meet their obligations.”
Pension provision is a complex and detailed discipline, and even more so when the responsibility extends to staff and employees. And it is becoming increasingly apparent that failure of an employer to meet their legal obligations can prove an expensive business. Whilst The Pensions Regulator is an excellent source of guidance, the support of an adviser who can understand the business and its responsibilities can prove invaluable.