Action taken against companies who have failed to meet auto enrolment requirements, has risen by 306%, according to The Pensions Regulator.
Enforcement action has increased to 8,812 incidents in the year to March 2016, up from 2,169 the year before.
Since 2012, employers have been required to enrol all eligible employees automatically into a pension scheme and to make the minimum required contributions or provide a minimum level of benefits in the case of defined benefit schemes.
This considerable rise in enforcement action is attributed to smaller employers being unprepared. Pension software provider, Paycircle, who has been analysing the figures from The Pensions Regulator, suggests that as many as 55,000 of Britain’s micro-employers have only a “limited understanding” of their duty to provide their workers with a pension.
However, the first group of small and micro-employers (with one to four employees) subject to pension auto-enrolment deadlines, did achieve a compliance rate of above 95%.
It is estimated that there are 262,000 micro-businesses that need to begin providing a workplace pension before 2018. Paycircle says that if they do not take action in time, employers could together be facing fines of up to £22m.
The Pensions Regulator has powers to issue escalating penalty notices, which can be given to employers that fail to comply with initial warnings. These will accumulate at a daily rate, £50 for micro-employers and £500 for small organisations.
The Regulator has published figures on compliance breaches for the second quarter of 2016, which revealed that it had used its enforcement powers 4,489 times, up from 4,161 occasions in the quarter before.
Executive director for automatic enrolment at The Pensions Regulator, Charles Counsell, said: “The law is the law. While the vast majority of employers are complying with it, some small employers are still risking fines by failing to understand how it affects them.”
In 2012 47% of all UK workers were enrolled in a workplace pension. This rose to 66% in March 2016.
The deadlines for employers to auto-enrol their staff are staggered.
- Large employers with 250 workers or more, had to begin in 2012.
- Medium-sized employers with 50 to 249 workers, began in 2014.
- Micro-employers with 1 to 4 employees and small businesses with 5 to 49 staff, began in 2015 and will continue until 2018.