Auto enrolment - can you afford not to comply?
10th April 2015
No small business owner likes surprises, especially when it comes to staff.
But whilst many are aware that changes to workplace pensions require employers with at least one member of staff to enrol in and contribute to a workplace pension scheme and that there are financial penalties for not doing so, they may not realise that this is just one small part of what they could owe.
Delaying the setting up of a workplace pension scheme could leave small businesses with a cash flow nightmare: as well as facing financial forfeits from the Pensions Regulator, they’ll also have to cover the cost of back-dated contributions.
Take a firm with 100 employees which is three months late in meeting its auto enrolment duties. As well as the fines imposed by the Pensions Regulator, they’ll face a bill of £13,000 (on average) for backdated employer contributions.
A firm with 50 employees in the same position will owe around £7,000 in backdated payments.
On top of this, the Pensions Regulator also has the powers to force firms to pay outstanding employee contributions (in addition to their employer contributions) if they are more than three months late in signing up to auto enrolment process.
John Davenport, Director of Cassons Financial Planning Limited warns: “Employers who keep putting auto enrolment to the bottom of their list are going to be caught out. The financial ramifications for not complying, both in terms of penalties and contributions, can be huge. It really is best to find out how much it is going to cost, and when you need to begin the procedure to ensure you have budgeted for it.
“Firms should find out their staging date and make sure they’ve started planning at least 12 months in advance.
“Over the next 18 months approaching 400,000 employers will reach their staging date and the number of businesses looking to place their workplace pension scheme with providers will increase, with industry fears about how the market will cope with demand. This is why we are suggesting that businesses look at auto enrolment as soon as possible.”
“If you’ve already got a workplace pension scheme it’s not enough to think that it’s eligible – you must ensure it meets the criteria. Even after this, there is still work to be done to make it auto enrolment compliant.”
If you’re not already aware of your auto enrolment staging date you can email us at email@example.com with your PAYE reference number and we can make you aware of when you must have implemented your scheme by. We can also discuss a plan of action to meet your auto enrolment duties as an employer.
All content is for general guidance only. It provides an outline, and may not include points which are important in your case. You should not rely on this blog without taking individual advice based on the full facts of your case. The information given was correct at the time of publication.