In January 2019 EMW Law published an analysis that identified that the number of businesses fined by the Pensions Regulator for auto- enrolment errors has climbed 144 per cent to 35,810 in 2017-18 from 14,650 in 2016-17.
Having reviewed the data from the regulator, it shows that there has been a threefold increase in fines; from £12.6m in 2016-17 to £42m in 2017-18.
The review conducted by EMW Law, identified that smaller companies without in-house HR functions are at risk of making errors when attempting to auto-enrol employees, due to the complexity of auto-enrolment.
Indeed our experience would certainly concur with the research; however, I would go further and say that errors are not limited to smaller employers.
While larger businesses will often use specialist payroll software to calculate what pension payments to make on behalf of staff, we have come across many instances where large employers have very poor record-keeping.
We have found that many large employers have approached auto-enrolment as a ‘tick box’ exercise, with the only fully understood ongoing duty being tri-annual re-enrolment. Duties such as scheme certification (which need to be done every 12-18months) have largely been overlooked, and default fund reviews have been assumed to be the responsibility of a third party.
Another typical finding has been a lack of ongoing training or complete lack of a governance structure. There are many instances where those members of staff who initially dealt with auto-enrolment have subsequently left the business, taking the knowledge with them. Those then taking on the duties are not fully versed in the legislation.
This is leaving employers exposed to large fines as the regulator is conducting spot checks around the country. The watchdog warns that “employers should make sure they’re staying on top of their legal duties as we may pay them a visit”.
With smaller business we have seen a trend where they have tried to deal with auto-enrolment ‘on the cheap’ with an increasing number now revisiting their approach and seeking help from a professional advisor as they realise that they do not have the resources to accurately maintain on-going compliance.
In recognition of the struggles many employers are experiencing we have created an auto-enrolment audit service so as to ensure there are no ’blind spots’, and that employers can adopt a best practice approach.
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.
This article was previously published on Smith & Williamson prior to the launch of Evelyn Partners.