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Sharp Rise in Fines as Smallest Employers Now Staging

20 September 2016 by Crystal HR & Payroll Ltd

Pensions Regulator issues 96 ‘escalating penalty notices’ in three month period to force companies to enrol their workers.

The number of employers being fined up to £10,000 a ddont-ignore-the-wpp2_jpgay for not complying with the rules on workplace pensions has shot up by 300% in three months, official data shows.

The figures issued by the Pensions Regulator indicate that a small but growing number of businesses are steadfastly refusing to comply with their legal duties when it comes to enrolling their workers into a pension scheme.

These companies are now being hit with one of the most serious sanctions available to the regulator because neither a compliance notice nor a follow-up £400 fixed penalty had any effect.

Automatic enrolment began in October 2012, and since then more than 5 million people have been put into a workplace pension. All employers have to automatically enrol eligible workers, with both the business and the employee paying in.

The regime is being phased in and has now entered its most challenging phase, with the focus having switched from large, household-name firms to around 1.8 million small and “micro” employers, ranging from fish-and-chip shops to window cleaners and many individuals who employ a nanny or carer.

Employers who do not comply with the rules face a range of potential sanctions, and the Pensions Regulator has revealed that in the first three months of this year it issued 96 “escalating penalty notices”. This is a fine of between £50 and £10,000 a day, depending on the size of the business, and is only imposed when other efforts to force the employer to act have failed.

In the period 1 October to 31 December 2015, a total of 24 such notices were issued. During the previous quarter it was two, and in the period 1 April to 30 June 2015 it was zero.

The number of compliance notices issued in the first quarter of this year was 3,057, compared with 2,596 in the final three months of 2015. However, the number of £400 fixed penalties imposed fell, from 1,021 to 806.

The Pensions Regulator said that while compliance rates “remain high”, the number of escalating penalty notices issued “is on the rise”.

Charles Counsell, executive director for automatic enrolment at the organisation, said: “Most employers comply on time and we continue to see compliance rates in the high nineties. Others need a nudge and are prompted to meet their duties when one of our notices comes through their letterbox. It’s simply not fair for staff not to receive the pension contributions they are legally due. But failing to act also means an employer risks clocking up a significant penalty until they put things right.”

Catherine Pinkney, co-founder of payroll and workplace pension platform Paycircle, said the ongoing rise in the number of compliance notices and the sharp spike in the most serious penalty at the regulator’s disposal “should be a shot across the bows for the UK’s small and micro businesses”. She added: “While most businesses are complying, for those that don’t the fines will very quickly rack up.”

Meanwhile, separate research found that the challenges posed by automatic enrolment ranked alongside the possibility of the UK leaving the EU as the joint leading financial concerns for UK businesses in March. Insolvency trade body R3, which issued the research, said: “Just as many businesses – especially smaller ones – are worried about auto-enrolment pensions as are worried about Brexit.”


Failure to comply by an employer

Number of persons employed daily rate

1-4 £50

5-49 £500

50-249 £2,500

250-499 £5,000

500 or more £10,000

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