Report shows small businesses will rack up alarming costs in fines and fees for failing to comply with legal obligations
SMEs and micro-businesses across the UK could be facing fines totalling £25m for missing their auto-enrolment deadlines, according to research from cloud-based payroll and pensions platform Paycircle.
By law, 1.8million businesses are now required to auto-enrol employees into workplace pensions. But based on previous fines handed out by The Pensions Regulator (TPR), a high percentage of them will miss the government’s 2018 deadline, and have to pay fixed penalty notices of £400.
And with auto-enrolment set-up costs taken into consideration, the total cost for firms to comply could even be as high as £350m across the country.
According to TPR data, more than 95 per cent of the 63,700 companies have complied with the law since July 2012, with the remainder being handed fixed penalties.
However, if the current rate of fines continues, some 63,000 employers (around 3.5 per cent) may find themselves in hot water.
And according to TPR, 40 per cent of micro employers (firms with 1-4 staff) could spend up to £317m seeking external advice between now and 2018.
Employers have five months to sign a declaration of compliance from the date of setting up a workplace pension, before being sent a compliance notice. They will then have 60 days to declare, before being fined.
“The percentage of smaller employers that incur a penalty is likely to be higher than the rate to date as smaller companies have less people and time for administration duties,” says Catherine Pinkney, co-founder of Paycircle. “Now is the time for small firms to be proactive about auto-enrolment, or face fines that can rapidly escalate.”
Scottish Widows retirement expert, Lynn Graves explains where small employers yet to go through auto-enrolment should start:
“Employers need to know their staging date for automatic enrolment. This is available from The Pension Regulator’s website. Once you know the date you’re working to, you can put plans in place to ensure you’re compliant with the regulations.
“Although employers shouldn’t underestimate the work involved in getting ready for auto-enrolment, there are various options available to them and setting up a scheme for auto-enrolment needn’t be costly. With a little bit of planning it should be easy for employers to avoid fines so we’d encourage business owners to get on the front foot.”
Businesses can calculate how much auto-enrolment will cost them via Paycircle’s free workplace pension assessment tool paycircle.co.uk/workplace-pension/
Scottish Widows’ Employer hub has a range of useful information on workplace pensions scottishwidows.co.uk/corporate/employers_and_trustees