Auto enrolment pitfalls that small and micro employers need to avoid

Small employers avoid auto enrolment fines

Of the companies that signed up with workplace pensions provider NOW: Pensions in the fourth quarter of 2016, 41% signed up either very close to their staging date or after their staging date deadline had passed – the highest number recorded over the year.

The Pensions Regulator (TPR) have reported that they are now starting to see the first employers who staged for automatic enrolment beginning to receive County Court Judgements (CCJs) for failures to pay their automatic enrolment breach fines TPR may seek a CCJ against an employer when they persistently ignore penalty notices issued by TPR.

In TPR’s quarterly Compliance and Enforcement bulletin for October-December 2016, TPR reported that the number of Escalating Penalty Notices (EPNs) has nearly doubled to 870 during the quarter, and although the level of Fixed Penalty Notices (FPN) has fallen some 20% to 2,919 during the period, it remains high.

For the majority of small and micro businesses (fewer than 30 employees), the auto enrolment duty deadline was 1 April 2017.

If you’re sitting safe in the knowledge that your business has fully prepared and auto enrolled all eligible staff, please take a minute to check that you haven’t fallen foul at the final hurdle. For example, the key thing many businesses forget to do is to send their declaration of compliance to TPR.

Declaration of Compliance

All businesses have five months from their staging date to complete the online declaration of compliance. If your declaration of compliance is not completed, TPR assumes your auto-enrolment duties have not been fulfilled and is likely to issue you with a fine.

Formal warning letters

There are a range of notices TPR will issue before it gets as far as slapping you with a fine, if informal action is not working or not appropriate. The first is a formal notice, which indicates that TPR believes you may be in breach of your duties and requires more information from you.

Next is a compliance notice which will explain how TPR thinks that you have breached your duties, what steps to take to become compliant, and a time frame for completion.

An improvement notice is typically issued following a formal notice, and like the compliance notice, will inform you of the steps you need to take and the date they will need to be completed by.

Fixed penalty notices

FPNs are issued if you have failed to comply with any of the statutory notices or if there is sufficient evidence that a breach has been committed that allows for the immediate issue of a FPN. It is a fixed sum of £400.  Failure to pay an FPN can result in TPR taking further action, which may lead to prosecution.

You can appeal against a FPN. Under its regulatory commitment, The Pensions Regulator has to consider all the relevant circumstances of each case, and ensure a ‘robust and fair review and appeal process’.

If the appeal fails, you can still contest your fine at a tribunal, but in all the appeals so far, no employer has been able to convince a judge that they had a ‘reasonable excuse’ for failing to comply.

Although the idea of a reasonable excuse is also used by HMRC for appeals against tax penalties, TPR has made it clear that something that amounts to a reasonable excuse for HMRC’s purposes may not be enough to avoid an automatic enrolment fine.

TPR has stated the following does not amount to a reasonable excuse:

  • you relied on someone else and they let you down;
  • you found the online system too difficult to use;
  • you didn’t get a reminder;
  • you made a mistake;
  • you or a member of staff were ill;

Escalating penalty notices (EPNs)

If you fail to comply with a statutory notice, TPR may issue an EPN. EPNs accrue at a daily rate until the fine is paid. The fine for small employers with 1 to 4 staff is £50 per day, and for those with 5 to 49 employers it is £500 per day.

If an employer ignores a FPN or a EPN, TPR may seek to recover full payment in the civil courts, which could result in a CCJ being issued against your company. If a business fails to pay up within 30 days of receiving the CCJ, it gets entered on their credit record and remains there for six years, which can seriously affect their business’ credit rating.

Fess up and act fast

If you’re suddenly panicking that you may have missed an important reminder about your pension responsibilities, don’t panic. Firstly, check your staging date.  Our online tool may be able to assist you in finding your staging date

If you are in danger of breaching your auto enrolment duties, contact TPR as soon as possible to talk through how you plan to resolve this. They have pledged to provide as much assistance, either by telephone or in writing, as is reasonably practicable to assist employers who inform them that they are struggling to comply.

If you want advice or assistance about how to meet your pension responsibilities, NOW: Pensions is also here to help and provide guidance. You can contact us via NOW: Pensions Client Support – 0330 10 03 336.


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