SMEs at risk of heavy fines for auto-enrolment non-compliance

9th July 2013 | News

Many small and medium-sized enterprises (SMEs) are facing the threat of significant fines for failing to comply with auto-enrolment, according to a report published by law firm, Irwin Mitchell.
 
The study uncovered that a number of employers are yet to 'stage' auto-enrolment and fully consider the key issues that need resolving ahead of its implementation.
 
Following its research of more than 250 small UK employers, almost two-thirds had failed to budget for the additional costs that can be incurred as a result of auto-enrolment, while nearly 40 per cent of respondents said their payroll system was non-compliant.

 

 

What is auto-enrolment?

Auto-enrolment is a new type of work-based pension scheme which came to fruition in 2012, automatically registering anyone who qualifies for the scheme. Employees have the option to opt-out afterwards, but the system works to stop workers from missing out on pension schemes simply because they don’t get round to completing pension forms.
 
The report found that six out of 10 employers have not checked the pensions provisions contained within their staff contracts and assessed how they affected plans for auto-enrolment.
 
Tom Flanagan, partner and national head of Irwin Mitchell’s Employment and Pensions group, said: "There are many pitfalls to watch out for, including changes to employment contracts and pension scheme rules, restructuring employee benefits along with reviewing and replacing HR and payroll systems.
 
"Choosing the wrong option could involve committing time and resources in the wrong areas, or with an unsuitable solution."
 
Small firms that fail to deal with auto-enrolment compliance could be stung with fines of up to £10,000 a day, enforced by the Pensions Regulator.
 
"What we need is a more streamlined and cost-effective tool to help smaller businesses manage the transition, particularly in light of the recent Government statements about requiring the employer to meet the cost of advisors and consultants without being able to pass them on to the scheme or the employees," added Flanagan.
 
This summer, firms employing 2,000 to 4,000 people will be required to comply for auto-enrolment. From April 2014, businesses with between 160 and 250 employees will also need to be ready.