The dangers of missing your auto-enrolment deadline
Over 2,000 of the country’s smallest businesses have already incurred fines for missing their auto-enrolment deadline and, with more staging dates approaching, other companies look set to experience the same fate.
Under the Pensions Act 2008, every employer in the UK must set up a workplace pension for eligible staff and contribute towards it.
Whilst a large number of businesses are already complying with auto-enrolment, there are still 1.8 million employers set to auto-enrol before 2018.
Within that, each business has a staging date that varies depending on their size.
Most small businesses (those with 30 staff or less) must have it in place by 1 April 2017. Businesses without PAYE schemes must then start the auto-enrolment process from 1 April.
Failure to comply with your auto-enrolment requirements will result in enforcement action which starts with statutory notices and is followed by penalty notices. Further non-compliance may result in court action.
Missed deadlines could cost businesses £25m
According to data from The Pensions Regulator, over 95% of the 63,700 companies that have ‘staged’ since July 2012 have complied with law.
However, 2,234 businesses have missed the deadline and have been issued with fixed penalty notices of £400.
If this rate of fines continues, research from Paycircle suggests that around 63,000 businesses (3.5%) will receive non-compliance fines equating to more than £25m.
However, accounting software vendor Geniac quizzed 500 businesses with a turnover under £500,000 and found that half are in danger of incurring penalties for not making provisions for their employees in time.
If this is an accurate representation, it suggests that the total number of fines may be much higher than Paycircle’s estimations.
Are you prepared?
Smaller businesses may struggle to comply in time because they have less resource and time for the administration duties required.
This is why it’s vital to find out your staging date and start preparations as soon as possible.
Auto-enrolment can also stretch your business’s cash flow, so it’s important to factor this into your forecasts. As well as contributing towards the pensions you may also need to seek external advice to ensure you are complying correctly.
The research from Paycircle found that 40% of businesses with less than four staff will seek external advice to the tune of £317m between now and 2018.
Added to the potential fines of £25m, this means that the total cost of compliance for small businesses could be as much as £350m.
To find out more about auto-enrolment and what your business needs to do please visit the Pensions Regulator website.