Workplace pensions auto enrolment – How to avoid getting fined

Avoid fines by auto enrolling

If you run a small business, the last thing you need is a £400 fine for failing to comply with auto enrolment. And the fines can stack up fast if you continue to break the law. If you run a business which employs one to four people, you could be fined £50 a day if you don’t set up a workplace pension scheme. If you have a bigger team of 5-49 people, that fine can rise to a whopping £500 a day.

We know what you’re thinking. “How do I avoid getting fined?” Some of you may also be wondering: “What’s auto enrolment?



Auto enrolment

Let’s start from the top. Auto enrolment is a regulation which is aimed at helping people to save more while they’re working so that they can enjoy a more financially secure retirement.

Millions of people aren’t putting enough money aside for their retirements. We are living for longer and the state pension won’t be enough for most people to live on. That’s why the government is encouraging people to save into workplace pension schemes.

Auto enrolment harnesses the fact that most people think they ought to be saving into a pension but might not get around to actually doing anything about it.

The government is therefore asking employers to set up pension schemes in the workplace and put their staff into them without the individuals having to do anything. If your employees don’t want to be in the pension scheme, they can opt out within one month of being put in.

Encouraging your staff to opt out of the pension scheme is a big no-no. That could result in a daily fine of £1000 if you employ 1-4 people.

An added incentive for savers is that employers are required to contribute some money to their pensions. The minimum contribution an employer must make is 1% of an employee’s salary. This will increase over time; by 2019, you as an employer will need to contribute a minimum of 3%.

You may decide you want to contribute more to your staff’s pensions, or they may decide to save more themselves. You can read more about how to put together your contribution structure here.

How to avoid fines

To avoid getting fined there are a few steps you should take now. The first is to check your company’s deadline for setting up a pension scheme.

The second step is to think about what kind of pension scheme you would like to set up. Here you may have a few choices:

You may already have a pension scheme. If so, check whether it will qualify for auto enrolment. If it doesn’t you may need to set up a new pension scheme, and if you do be sure to do your homework. The decision you make will have long term implications for you and your workforce so don’t be rushed. When considering providers, firstly check whether they will accept your business as not all pension providers offer their auto enrolment schemes to small employers. Also ask how will they support you and what their costs and charges are.

To avoid getting fined, it’s important to start planning early. Getting your payroll set up and your staff’s data in order may take a bit of time. However, there are plenty of companies and advisers who will be able to help you.

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