Are there acceptable reasons for Auto-Enrolment Non-Compliance?

There are still a lot fixed penalty notices and escalating penalty notices being issued by the Pensions Regulator to companies that do not comply with Auto Enrolment when it comes to Workplace Pensions. This article looks at the number or penalty notices issued in the period 1st July – 30th September 2016. It also focuses on the ‘acceptable reasons’ for non-compliance.

The number of fixed penalty and escalating penalty notices

During the period 1/7/2016 to 30/09/2016, the Pensions Regulator issued 3,728 Fixed Penalty Notices to employers for failing to meet their automatic enrolment duties. The Fixed Penalty Notice, under section 40 of the Pensions Act 2008, issues a fine of £400.

During the same period, 576 escalating penalty notices were issued, under section 41 of the Pensions Act 2008, of between £50 and £10,000 per day (depending on the size of the company) for continuing failure to meet their automatic enrolment duties after the issuing of the initial fixed penalty notice. Note that the fine here is PER DAY.

What constitutes an Acceptable Reason for non-compliance?

A number of businesses ask the regulator to review their decision to issue a penalty notice. Some of these then go on to contest their fines at a tribunal, if the review didn’t go their way. This is where a common defence is the claim that their non-compliance was unintentional and that they had a ‘reasonable excuse’.

The duty of employers to help employees to save into a workplace pension has now been extended to all UK employers. This duty, enshrined in law, means that all UK employers (there are some exceptions) must ensure they auto-enrol their staff into a qualifying scheme by the auto-enrolment deadline for their firm.

It’s for this reason that, to put it bluntly, for a reason for non-compliance to be accepted, it must be a very good reason. This means that the reason must be for something unexpected happening that was outside of the directors control.

In a report from the Pensions Regulator, they state the following The following reasons will not be accepted as a reasonable excuse:

  • The employer relied on someone else who let them down
  • The online system was too difficult to use
  • The employer didn’t get a reminder from the Regulator
  • The employer made a mistake
  • The employer or the designated member of staff with responsibility for auto-enrolment was ill

Charles Counsell, Executive Director of Automatic Enrolment at The Pensions Regulator said:

“We recognise that employers have unique circumstances and challenges, but the law is still the law. Employers who are struggling should contact us, we are here to help – do not wait for a fine.

“The vast majority of employers are successfully meeting their automatic enrolment duties and are doing the right thing for their staff.  A small minority do leave plans too late but in most cases the nudge of a compliance notice is enough to get them back on track and avoid a fine.”

If you need some help with Auto Enrolment, Contact Us

As payroll specialists we have helped a lot of our clients with the auto-enrolment process. It can seem daunting and without help it can be time consuming. Contact us or call us on 0121 422 0550 if you need some help with auto-enrolment. We’ll also make sure that your payroll system is up to date and can cope with the requirements of workplace pensions.

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