Are you at risk of a pension auto enrolment fine?

Pension auto enrolment

While we’ve been advising businesses like yours to prepare themselves for their upcoming pension auto enrolment responsibilities, it seems like many businesses have yet to understand the importance of what needs to be done to avoid an auto enrolment fine.

Communication breakdown

Recent research from Creative Auto Enrolment has revealed that around three quarters of small and medium-sized businesses (SMEs) facing auto enrolment in 2014, don’t feel that they have received enough information from the Government to enable them to comply. Many employers who have missed their staging dates are now facing an auto enrolment fine.

The research also suggests that over 5,000 businesses are at risk of acting unlawfully by encouraging their employees to opt out of auto-enrolment.

Serious business – avoid an auto enrolment fine

The managing director of Creative Auto Enrolment, David White, has stated: “This is serious business. Companies face fines and legal investigations if they get auto enrolment wrong and The Pensions Regulator has threatened that employers need to do the right thing or it will ‘come after’ them.”

“However, everything we are hearing tells us that many are mishandling the process because they are ill-informed. It’s unfair to hand out penalties to companies that haven’t received adequate information and guidance in order to prepare for auto enrolment.”

Act now

So simply by reading this blog post, even if this is the first you’ve heard of it, you’re in a position to prepare yourself for the upcoming changes. Here’s what you need to know.

Unless you already do so, the new laws mean that you must automatically enrol your workers into a workplace pension scheme if they:

  • are aged between 22 and State Pension age;
  • earn more than £10,000 a year (this figure may change with each tax year); and
  • work in the UK.

Know your staging date

The largest companies have already started this process, and it’s not long before every business, including yours, needs to do the same. Exactly when your auto enrolment responsibilities take place (known as your ‘staging date) depends on how many people there are in your PAYE scheme.

You can find out when your staging date is at The Pensions Regulator website. You’ll need your PAYE reference To fully prepare, it’s a good idea to get the ball rolling a full year before your staging date begins; you can create your own action plan using a tool on The Pensions Regulator website or download our handy timeline and checklist.

Know your employees

Once you know your staging date, you should identify which employees you need to enrol into a pension scheme, using the criteria above. You may find our tool to help you assess your workers’ eligibility useful. You may be able to enrol them into your existing scheme, or you might need to set up something new. Speak to your pension provider to assess whether your current scheme is complaint.

Keep everyone involved

It’s important to communicate these changes to your employees at each stage. Even if your staging date seems quite a way off, talk to your workforce to explain what will be happening, and what steps you’re taking. Make sure you’re prepared for any questions from your employees and that you put any important information in writing to your workforce.

Stick to the procedure

When it’s time for you to enrol eligible staff into the pension scheme, make sure you follow the correct procedure, register with the Pensions Regulator and keep records. Then, it’s simply a case of contributing to your staff’s pensions.

We’re here to help

If you’d like to find out more, visit our dedicated auto enrolment advice area to check out the helpful articles and infographics or download our free auto enrolment guide.

Samantha Bell

Samantha Bell

HR Consultant

Samantha is a HR consultant, specialising in giving HR advice to small businesses in the UK.