144% rise in number of businesses fined for auto-enrolment errors

The analysis of data from the regulator shows that businesses were fined £42m in 2017-18 for auto-enrolment errors, up more than threefold from £12.6m in 2016-17.

The rise in the number of fines coincides with the extension of auto-enrolment duties to include smaller businesses with fewer than 50 employees.

According to EMW, the complexity of auto-enrolment schemes means smaller companies without in-house HR functions are at risk of making errors when attempting to auto-enrol employees. 

One common issue for SMEs is poor record-keeping. While larger businesses will often use specialist payroll software to calculate what pension payments to make on behalf of staff, or pay an accountant for the service, smaller businesses may not have the resources to accurately calculate an employees’ contribution to enrolment schemes.

Smaller businesses can also be fined for something as simple as not providing regular updates to the regulator. Failure to provide regular salary updates and data submissions on employees is regarded by the regulator as non-compliance, and will result in substantial fines, EMW highlighted.

Auto-enrolment errors can become increasingly expensive for employers if they go unreported for an extended period of time and the regulator conducts spot checks around the country. The watchdog warns that “employers should make sure they’re staying on top of their legal duties as we may pay them a visit”.

Jon Taylor, principal at EMW, said: “The sharp rise in the number of fines by suggests that SME’s are having real problems keeping on top of complex auto-enrolment schemes. While larger businesses will have the necessary infrastructure and expertise to correctly auto-enrol workers, the same does not always apply to smaller businesses.”

He added: “Considering the huge number of businesses now being caught by fines, perhaps the Pensions Regulator needs to consider moderating the scale of the fees especially for SMEs.”

A spokesperson from the Pensions Regulator said the vast majority of employers are successfully meeting their auto-enrolment duties.

"The rise in the number of times we have used our powers is in line with the rise in the number of employers with automatic enrolment responsibilities. We have no evidence there is any widespread issue of employers keeping inaccurate records or paying incorrect contributions," the spokesperson said.

They noted that the research carried out into employer awareness and understanding of auto-enrolment shows the majority of employers are aware of their ongoing duties, which include record keeping and maintaining contributions, and said they are confident they are complying successfully.

"Where an employer does not have expertise in this area, such as a dedicated payroll department, we encourage them to seek help from a professional advisor to ensure they meet their legal duties. Employers who become non compliant will be issued with a compliance notice and in most cases, this warning is enough to get them back on track," the spokesperson added.