The Pensions Regulator has written to small and micro employers across the country reminding them of new workplace pension requirements, but experts say it will need to take a harder line to drive up compliance.
Auto-enrolment could meet its greatest challenge this year, with more than half a million small and micro employers scheduled to stage during the course of 2016.
An average of 58 employers have enrolled every day since the policy started in 2012, but this will soar to more than 1,500 a day as the initiative extends to smaller businesses.
This week the regulator was quick off the blocks in reminding all employers of their fast-approaching duties.
If you don’t have a carrot and stick approach [the regulator] will be ignored completely
Neil Latham, Punter Southall
Writing to employers across the country, the regulator outlined the risks of failing to comply with auto-enrolment legislation.
Employers failing to fulfil auto-enrolment technicalities on time face initial informal action from the regulator, prior to being served with statutory or penalty notices; employers given a fixed penalty notice must pay a £400 fine.
In its corporate plan for the period 2015-18, released in March last year, the regulator acknowledged many employers “will leave implementation of their employer duties until the last moment or until it is too late”, and risk enforcement action.
Charles Counsell, the regulator’s executive director for automatic enrolment, said the regulator is helping employers prepare ahead of time by sending out alerts and providing tools to guide them through staging.
“Employers should start planning 12 months before their duties start and make our website their first port of call,” he said.
Harder to ignore
UK small businesses will also be reminded of their duties as Workie, the Department for Work and Pensions’ furry friend, makes a return to TV screens this week.
“Workie is back again this year on TV, radio and across social media to remind employers they cannot ignore the workplace pension,” said Counsell.
“Our message to employers is to look out for letters from us and act on them. Those whose duties start in the first three months of the year should now be well underway with their plans.”
Despite the regulator’s efforts, auto-enrolment consultants said it will be tough to get the huge volumes of employers through the door and compliant on time.
Adam Bexson, auto-enrolment specialist at consultancy Barnett Waddingham, said the regulator’s step-by-step online guide is useful, but the expectation that employers will be able to tackle the project themselves ignores the opportunity cost it presents to small businesses.
“[In a small company] each person is a significant resource – it’s the opportunity cost of taking people away from the business to sort [auto-enrolment] out,” said Bexson.
“It’s not as if they haven’t got enough to do already,” he added.
Enforcement awareness
Neil Latham, principal in consultancy Punter Southall’s defined contribution team, said the regulator will need to be “officious” with small employers and raise awareness of enforcement actions.
“If you don’t have a carrot and stick approach [the regulator] will be ignored completely,” he said.
“They’re not publicising the enforcement actions they take sufficiently – you just don’t see it in the press. That would spur more people into action.”
