Pensions Regulator: 500,000 UK Businesses Risk Fines as Auto-Enrolment Gathers Pace

Half a million small and micro businesses in the UK risk a fine if they do not meet their new workplace pension obligations, according to a warning from The Pensions Regulator.

The regulator says that despite smaller businesses receiving letters advising them to start preparing for automatic enrolment, many will still leave it too late and face increasing levels of compliance action as a result.

The warning has been issued to coincide with the return of Workie – the furry creation from the Department of Work and Pensions – to TV screens across the UK to remind smaller employers about their responsibilities under the automatic enrolment scheme. The hope is that Workie’s hard-to-ignore appearance will spark conversations about the impending changes when he appears at places of work.

Even companies which have no staff who need to be placed into a pension scheme still have a duty to inform their employees about the changes and complete a declaration of compliance, says The Pensions Regulator.

The regulator also says that anyone who receives a letter from them should make contact, even if they don’t employ any staff, so no unnecessary compliance action is taken in the future.

Executive director for automatic enrolment at The Pensions Regulator Charles Counsell said: “We are concerned that a minority of smaller employers are leaving things too late and struggling to comply on time. We are helping employers avoid this by alerting them in good time to their duties and giving them the tools they need to meet them. Employers should start planning 12 months before their duties start and make our website their first port of call.”

The Pensions Regulator said that employers should check out a new online step-by-step guide in the first instance to help them understand their duties and start planning.

But it seems that small and medium-sized enterprises (SMEs) are already feeling the automatic enrolment pinch.

Research by the Chartered Institute of Personnel and Development (CIPD) found that 70% of smaller businesses are being financially impacted by auto-enrolment costs.

In its quarterly Labour Market Outlook, the CIPD said that to cope with the additional costs, employers are taking lower profits or absorbing costs (21%); paying the statutory minimum pension contributions for auto-enrolled staff; or stopping/reducing wage growth (10%).

However, in the case of SMEs, 32% said they were most likely to cope with the additional costs by accepting lower profits.

It’s not all bad news, though, with 58% of respondents saying that they had not noticed any change in their spending or saving as a result of the automatic enrolment changes.

Charles Cotton, performance and reward adviser at the CIPD, said that employers are “clearly taking a hit” and it will become more of a problem as the national living wage is introduced in April and the apprenticeship levy comes into force in 2017.

In light of its report, the CIPD urged employers to try and improve their productivity, so increased pension contributions will not have as big an impact on other parts of payroll.

In our experience, many SME’s still do not fully understand their obligations under Auto Enrolment and, for some who have started the process, they are finding it difficult to navigate around the requirements. We work closely with an organisation called AE in a Box and have referred many clients to them. They can take the stress away and help SMEs meet their requirements in a cost effective way.


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