Enforcement Data Confirms Auto Enrolment Still A Current Issue

Nov, 2019

With Automatic Enrolment very much business as usual for larger organisations and the 3rd anniversary and first re-enrolment coming up for tens of thousands of smaller companies it could be perceived that Auto Enrolment is no longer a newsworthy topic.

However, it’s clear from The Pension Regulators’ (TPR) enforcement data and regular press statements around specific prosecutions that this isn’t the case.

Substantial Fines during 2018

The published enforcement figures from TPR show that during 2018 over 40,000 companies were fined for non-compliance with their auto-enrolment obligations and with fines ranging from a fixed £400 penalty to a daily escalating penalty ranging anywhere between £50 and £10,000, if action isn’t taken it can be a significant sum.

In addition to those firms that were fined, a further 41,057 companies were issued with compliance or unpaid contribution notices during 2018 but avoided being fined by making the recommended changes. This figure for 2019 has already reached 33,529 (as at end of September) meaning that a significant number of businesses are failing to comply fully with their legal obligations.

The range of companies being fined is wide and not limited solely to those employers failing to comply, it also includes pension providers themselves. TPR announced a fine of £70,000 to auto-enrolment provider NOW: Pensions last year after a series of administrative errors resulted in £18 million of pension contributions not being collected from companies.

Another high-profile case, of an unnamed London based service company with 5000 employees, resulted in a fine of £350,000. The message from the TPR on this case – don’t bury your head in the sand and allow the fines to escalate, take the action required quickly.

It isn’t just larger companies that are falling foul of the regulator, only last month TPR announced it was prosecuting a small northern based children’s nursery with 15 employees for failure to comply with their auto-enrolment responsibilities.

No matter what size company, if it’s not meeting its full AE obligations it runs the risk of being found out and having enforcement action taken.

Common Compliance Failures

Whilst some of those who face prosecution and fines have deliberately not undertaken their required duties, warnings and fines commonly relate to unintentional errors within the business’ compliance processes – wrong contribution start dates or missing age thresholds are common, both of which could be easily avoided.

The regulator has also highlighted re-enrolment as another key area where companies have been tripping up. Their latest quarterly enforcement bulletin states that in the period up to 30th September, they have taken enforcement action against over 4,000 employers for failing to carry out re-enrolment duties correctly, with over 800 penalty notices being issued for continued non-compliance.

The fact that they have launched a new online tool to provide greater support to employers would indicate that they see this as a major area of concern going forward.

A Proactive and Data Driven Approach to Enforcement

The enforcement data for the period to 30th September shows that the proactive approach to enforcement has continued this year with 20,298 firms facing penalties.

They make it clear in their latest compliance bulletin that they are taking a tough stance on non-compliance with countrywide inspections being undertaken. As a result, they state that 74% of spot checks of businesses have identified breaches and 76% of those have resulted in enforcement action.

Its also clear that they are moving more and more to a data led approach whereby they are spotting issues by using real time data to identify businesses that they believe are breaking the law and target their action towards them.

They have also flagged a hard-line approach to businesses that they believe are trying to avoid their AE duties by transferring the workforce to a new company and then dissolving the original firm. Investigations around this area are not just focusing on the businesses but their advisors who may be recommending such a course of action.

Continued Support for Clients

As professional advisors to businesses of all sizes, it’s clear from the number of business facing warnings and enforcement action from TPR that many of them still require support when it comes to Automatic Enrolment.

This might be as simple as reminding them of the risks of non-compliance, asking pertinent questions about re-enrolment to ensure they are fully aware of what is required, or getting them to proactively audit their systems, payroll software and compliance process to ensure they don’t fall down over something straightforward.

And, most importantly if they should receive a warning ensuring that they take immediate action to address and correct the issues to prevent them from becoming another in the list of statistics.