What will happen if you don’t comply?
Under the current legislation The Pensions Regulator is responsible for ensuring that you comply with your employer duties to provide an Auto Enrolment scheme for your employees. Although education and assistance may initially be forthcoming if you raise a mistake with them early, the Regulator does have the power to take action against employers who fail to carry out their duties. They are likely to enforce the penalties where breaches appear less innocent or where correction is slow.
The Pensions Regulator will follow a three stage process as shown:
Stage 1 Compliance/unpaid contributions notice
This notice will detail the breach and require the employer to correct it within a specific timescale. A notice may also include a requirement to pay missed contributions with interest.
Stage 2 Fixed penalty notice – £400
This notice will require employers to put right the breach identified in the previously issued compliance notice. Employers will be given at least four weeks from the date of the fixed penalty notice to put things right. Failure to comply by the specified date will result in the fixed penalty being applied.
Stage 3 Escalating penalty notice
If an employer fails to comply with the original compliance notice and subsequent fixed penalty notice, they will face daily escalating penalties.
| Number of workers in PAYE scheme |
Daily penalty rate |
| 1 to 4 |
£50 |
| 5 to 49 |
£500 |
| 50 to 249 |
£2,500 |
| 250 to 499 |
£5,000 |
| 500 + |
£10,000 |
The Pensions Regulator can impose three other types of penalty on employers:
Wilful failure to comply
Employers who wilfully fail to comply with the employer duties face fines and/or up to two years’ imprisonment.
Inducements
Employers who induce workers not to join or to opt out of a pension scheme will be subject to the three stage compliance process.
Prohibited recruitment conduct
Employers are not allowed to make any statement or ask any questions during the recruitment process, which indicates (either explicitly or implicitly) that the worker may not join, or may opt out of a pension scheme.
| Number of workers affected by breach |
Fixed penalty |
| 1 to 4 |
£1,000 |
| 5 to 49 |
£1,500 |
| 50 to 249 |
£2,500 |
| 250 + |
£5,000 |
