Ignore pension auto-enrolment at your peril
The law on auto-enrolment requires all employers to enrol eligible workers in a pension scheme automatically and to pay mandatory minimum contributions for those employees. Large employers are already required to comply, with smaller ones being required to follow on over the next couple of years.
The Pensions Regulator has recently issued its first progress report on automatic enrolment. In the report it identified Dunelm Soft Furnishings as a company that had failed to complete its auto-enrolment registration by its deadline (1 April 2013.) The regulator issued a compliance notice, requiring the company to complete its registration. When this was completed, the regulator considered that the company may have failed to comply in other respects with its auto-enrolment duties. So it carried out an inspection of the company's premises using other powers under the Act.
The inspection revealed that the company had not automatically enrolled a number of its employees until after the company’s ‘staging date’ (the date when the automatic enrolment duties come into force for that business). Some employees were enrolled up to three months after that date and, as a result, had failed to pay a significant level of pension contributions, amounting to over £100k.
It also found that the compliance notice issued by the regulator had not been brought to the attention of senior executives within the organisation, indicating weak governance and support for the compliance process. It also discovered that the company had been aware of the problems when it completed its auto-enrolment registration, and so had falsely declared that it had complied with its auto-enrolment duties.
Dunelm identified a number of contributory factors that had led to its failures, including:
• key staff who had been tasked with auto-enrolment duties leaving the company at crucial points in the process;
• a bespoke payroll system being unsuitable for auto-enrolment purposes;
• inaccurate employee data being given to the pension provider.
The company cooperated with the regulator to address the issues. However, to protect members' benefits, the regulator issued the company with an unpaid contributions notice, directing it to pay the outstanding amounts. It did not impose a fine in this case but it has the power to do so.
The case highlights a number of key points for employers that are trying to ensure their own compliance with auto-enrolment duties. It is recommended that employers:
• ensure they allow sufficient time to prepare for auto-enrolment;
• appoint a project manager and provide training for that person;
• ensure a smooth handover if key people change roles;
• verify employee and payroll data to ensure they are up to date and accurate;
• Select, install and test payroll systems well in advance of auto-enrolment staging dates to ensure they are able to meet the requirements or check that their payroll provider has done this.;
Employers experiencing difficulties in meeting their auto-enrolment duties should contact the regulator to make the service aware of any problems the employer anticipates in complying so that they can work together to resolve them.
And lastly, don’t leave it too late to start. The feedback from employers that have already gone through the process suggests it takes longer than you might think to set it all up!
Posted on 19 Nov 2016