The Pensions Regulator has directed an employer to stump up £143,000 in contributions left unpaid due to payroll errors, with industry experts predicting bad press could have a positive impact on smaller employers with their own auto-enrolment problems.
Employee benefit consultants have said negative publicity could encourage smaller employers to comply, with off-the-shelf products leading to fewer procedural problems.
Dunelm key dates
April 2013: Dunelm's staging date.
August 2013: Registration completed with the Pensions Regulator.
August 2013: Regulator issued a compliance notice.
November 2013: The watchdog performs a statutory inspection.
December 2013: Confirmation the company had paid the £35,000 outstanding contributions for the four-weekly payroll.
December 2013-present: Unpaid contribution notice issued. Dunelm submitted revised unpaid contribution calculation of £108k, and paid outstanding contributions.
But non-compliance has risen with the number of employers staging. According to regulatory documents, 133 employers failed to comply in the period of January 1 to March 25 2014, while 96 employers were contacted about non-compliance in 2013.
Soft-furnishings company Dunelm failed to enrol members on its April 1 2013 staging date. It completed registration on August 15 2013 and subsequently was found to have failed to meet all of its auto-enrolment duties.
The employer enrolled members of its four-weekly payroll a month late and enrolled certain members of its monthly payroll three months late. It also paid insufficient contributions to the pension provider as a result of these.
A spokesperson for Dunelm said they have acknowledged the company's shortcomings and have been fully cooperative with the regulator.
“The delays related to unforeseen staffing issues as well as problems with the company’s bespoke payroll solution,” the spokesperson said.
The employer paid £35,000 in contributions for its four-weekly payroll following an inspection by the regulator. And £108,000 has been paid for the monthly payroll.
The regulator has the power to issue fines to employers as a result of non-compliance, but stressed its willingness to engage with employers who were struggling to comply.
“In cases where an employer has not understood their duties or has been unable to comply, the regulator will work with them to try and achieve compliance,” said the regulator in a report on the notice.
Lessons learned
Experts said even without fines being issued, the potential for negative publicity would be an incentive for employers to comply.
“Employers generally won’t want the adverse publicity that comes with this, it suggests a systemic failure within their organisation,” said James Bingham, associate at law firm Sackers.
One of the reasons given for Dunelm’s non-compliance was design flaws in a bespoke payroll solution used by the company.
“The more you do bespoke the harder it is,” said Andy Cheseldine, partner at consultancy LCP. “The smaller the employer the more likely they are to go along with the off-the-shelf [option].”
Many market practitioners expect that as smaller employers stage, cases of non-compliance will grow further. Cheseldine said this may affect the regulator’s ability to engage and support with employers, as it has with Dunelm.
“When you get to 2015/16 there’s no way they’ll be able to provide that support, but the type of problems will be different.”
Neil Latham, principal at consultancy Punter Southall, said many employers who have completed auto-enrolment are returning to the market to ensure that their processes are compliant.
“We’re beginning to see… some of the people who staged early redoing the whole exercise,” he said. “We’ve had a couple of clients coming forward asking us to audit.”
Latham said a client had found some of its communications were non-compliant after they rewrote material provided to them by consultants.
“Audits are beginning to be a key point,” he said.
