Pension Deadlines Loom for Small Businesses
Some 700,000 employers have already met their workplace pension commitments, since the government introduced its automatic enrolment legislation in 2012, making it compulsory for business owners to sign up employees to a pension scheme into which they must legally contribute, unless an employee decides to opt out.
Businesses that fail to comply with this legislation face big fines, and even the threat of jail for business owners and directors. And the final deadline is looming.
By February 1, 2018, a further 700,000 existing small and micro businesses are expected to have reached their staging date for workplace pension schemes. To help employers know when their staging date is due, the Pensions Regulator has drawn up a list of rules that they have to follow.
If a business takes somebody on between April 2 and September 30 this year, the date of their auto-enrolment duties will vary, but anybody planning to set up a new business and employing staff from October 1 will face auto-enrolment duties immediately.
So time is running out to avoid hefty penalties if they have not set up an auto-enrolment scheme – and they have to do so even if they only employ one person.
As part of a nationwide enforcement campaign launched in April, the Pensions Regulator has set up a number of inspection teams who have been conducting spot checks around the country to ensure employers meet their automatic enrolment duties and employees are gaining access to the workplace pensions they are entitled to. Small businesses in London, Greater Manchester, Sheffield, Edinburgh, Birmingham and Glasgow have already been visited, and this will continue. There is no hiding place.
Most small businesses have complied with the legislation, but the Pensions Regulator has revealed that an increasing number of penalties are being imposed as the size of the employers' staging gets smaller and the volume of employers increases.
This is almost certainly because small firms don't have the financial resources or staff dedicated to look after their payroll and pension affairs.
From April 1 to June 30, 2017, the Pensions Regulator issued 9,265 compliance notices, 4,794 fixed penalty notices and 1,384 escalating penalty notices.
This is how the different penalty notices work:
Statutory notices include compliance notices, third party compliance notices, unpaid contributions notices, improvement notices, third party warning notices, and third-party notices to individuals or companies. These are written notifications requesting action be taken to avoid the next level of penalty.
Fixed penalty notice
Failing to comply with a statutory notice leads to a fixed penalty notice of £400 which can be issued immediately if there is evidence of a breach of some duties.
Escalating penalty notice
An escalating penalty notice is issued when a fixed penalty notice has not been acted upon and states the future date from which an additional daily fine starts accruing. The daily rate is determined by the number of people in a company’s PAYE scheme, with the pensions regulator using the most recent data it possesses when it issues an EPN.
If you employ between one and four people, the daily rate is £50, between five and 49 the daily rate is £500, 50-249 £2,500, 250-499 £5,000 and 500 or more £10,000.
Just as incorrectly processing or failing to process income tax and National Insurance (NI) contributions leads to an employer being penalised, failing to apply Automatic Enrolment and general pension processes correctly will also be targeted.
Some other areas in which non-compliance may trigger penalties are:
- Failure by the employer to make their contributions to the pension scheme – fine up to £50,000
- Failure to pay over workers’ contributions to the pension scheme – fine up to £50,000
- Prohibited recruitment conduct such as encouraging staff to opt out, can be subject to a minimum fine of £1,000 increasing to £5,000.
Repeated failure to comply with the legislation will probably result in civil and/or criminal proceedings, which will undoubtedly cost a business much more than just money.
Act now to avoid penalties
Planning ahead and setting up a workplace pension for your staff is easy and Accountants etc. can help you with it. We can introduce you to local financial advisers who will be able to help.
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