The Pensions Regulator (TPR) has reported a sharp rise in the number of penalties issued for small companies who fail to offer auto enrolment pensions to staff
There have also been a record number of compliance notices in the last three months, hitting 15,000 as the number of companies entering the compulsory auto enrolment stage has increased by 50% as micro and small businesses with less than 30 employees enter the system.
The TPR’s quarterly compliance bulletin for July to September shows that the number of compliance notices has risen to over 26,000 to date, of which 15,000 were issued during the quarter.
Once a notice is issued, the majority of employers do comply when given this ‘nudge’ to remind them of their responsibility.
Although the nudge effect appears to be working, there has been an increase in penalties, with 3,728 issued in the last three months, over half the total 6,779 fixed penalty notices issued since the auto enrolment system was first introduced.
In addition, 741 escalating penalty notices (EPNs) have been issued, for sums of between £50 and £10,000 per day for failure to comply with a statutory notice. The majority of these (576) have been levied in the last quarter.
A number of those who received the £400 fixed penalty notices asked for the regulator to review the decision and some went on to contest their fines at a tribunal, claiming that their non-compliance was unintentional and that they had a ‘reasonable excuse’.
The TPR points out that the idea of a reasonable excuse is also used by HMRC for appeals against tax penalties, but says the tribunal has made it clear that the two regimes are separate. There are clear instances where TPR will not accept an excuse for non-compliance.
Circumstances which do not amount to a reasonable excuse for failure to comply include:
- the business owner/director or a member of staff were ill;
- reliance on someone else and they let you down;
- online system was too difficult to use;
- did not receive a reminder;
- you made a mistake.
This is different from HMRC guidance, which gives some latitude over use of the online service as if there is a problem with the taxman’s online service this is viewed as a reasonable excuse for failing to file a tax return on time.
Under the auto enrolment pension rules, tribunals have rejected this as an excuse for failing to complete a declaration of compliance as the TPR offers an alternative telephone service, and also because of the number of reminders that employers are given to complete their declaration in good time.
Charles Counsell, executive director of automatic enrolment at TPR 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 meeting their automatic enrolment. 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.’
The latest statistics show that by September 2016, 256,888 employers had set up automatic enrolment schemes, starting with the largest companies.
Catherine Pinkney, co-founder of Paycircle said: ‘These numbers are a real cause for concern. Between now and 2018 over a million small businesses are set to stage and, judging by this data, the number of fines is set to skyrocket. Too many small businesses are still in the dark about their workplace pension duties.’
The Pension Regulator Automatic enrolment Compliance and enforcement Quarterly bulletin Q3 2016 is here