Don’t let Auto Enrolment make you a criminal!

  1. Auto Enrolment enforcement

One of the findings from the 2013 ‘policy voice’ research on Directors’ attitudes to pensions, “(Another) new dawn for pensions”, was that a small number of employers were openly hostile to their duties under Auto Enrolment. Some indicated they would not comply with the legislation (Pensions Act 2008), presumably thinking it’s unlikely they will be caught.

These Directors may simply have been voicing their understandable frustration with their new duties and higher employment and administration costs, but it is important that all Directors realise that along with the legal requirement to comply with the Auto Enrolment regulations, is a well-prepared compliance and enforcement policy. (You can find the level of fines and sanctions on this website in the Services, Auto Enrolment section)

The Pensions Regulator has a statutory objective to maximise employers’ compliance with their Auto Enrolment duties and has developed a framework of oversight, investigation and enforcement. This includes a range of sanctions from requests for evidenced compliance, through a fixed penalty fine to a daily accumulating fine, and ultimately criminal prosecution which could result in a two year jail term. In addition to these sanctions, the employer will be required to put the employees back into the situation they should have been in had compliance been observed from outset. That of course means paying all missed employer pension contributions and most likely interest as well.

The regulator has a risk-based and proportionate framework for ensuring compliance and a number of intelligence gathering mechanisms. One of these is the Auto Enrolment registration that every employer must complete within four months of staging date. This is quite a detailed check-list which identifies compliance factors and provides information that assists further discovery should the regulator choose to follow up. In addition the regulator gathers market and industry intelligence, has information sharing agreements with partner agencies and develops information through whistle-blowers and other referrals. In the most serious cases of suspected non-compliance, the regulator has powers to enter employers’ premises and conduct investigations without prior warning.

Listed below are five key areas of non-compliance that the regulator may be particularly sensitive to:

  • not providing the different categories of workers (as defined by Auto Enrolment), with the correct information as it applies to them, and their options, in the right time-frame
  • not enrolling the relevant workers into a compliant pension scheme at the company’s  staging date or when the worker first becomes eligible
  • not calculating the correct pension contributions at the right time and paying them across to the pension scheme
  • recruitment screening based on auto enrolment potential
  • emphasising or inducing opt-outs.

It is worth noting with regard to recruitment screening that the safeguards around prohibited recruitment conduct were effective for all employers from 1 July 2012, irrespective of an employer’s staging date.

The regulator will assess risk based on particular industry sectors or company size, or other metrics they may think relevant. For example, a company with agency workers could be of higher interest to the regulator for the reason that without knowing the actual payment and contractual details, it is uncertain who – the agency or the client employer – is responsible for an agency worker’s Auto Enrolment arrangements. The regulator could worry that there may be non-compliance in such a case because neither party accepted that Auto Enrolment for those workers was their responsibility. Another example could be that family firms might feature higher than some employers in a risk-based assessment, if it is assumed there is less chance of an employee whistle blowing of their own accord if denied their Auto Enrolment rights. There could be any number of factors that make some employers feature higher up the risk gauge than others.

It is important that Directors comply with the Auto Enrolment requirements as they would do for any other employment legislation, and there is information to help on the Pension Regulator’s website.  Although the headline descriptions and explanations of pensions Auto Enrolment may seem straightforward, if costly, don’t be fooled. There are many devils in the detail. Almost everything you come across in Auto Enrolment is complex, and all employers should 1) prepare well before their staging date and 2) realise that after your staging date, in the post auto enrolment business-as-usual processes, operational and compliance challenges could be arising all the time.

Call CORPIAS today on 07975 979233 to discuss how we can help with your initial or ongoing compliance.