Aon Employee Benefits has predicted a surge in escalating penalty notices from The Pensions Regulator to tackle auto-enrolment non-compliance.
Speaking to FTAdviser, the consultant’s head of auto-enrolment Clare Abrahams said that non-compliance comes with consequences and only now that is becoming clear to many employers.
“There weren’t as many fines historically, but we are starting to see them come through in increasing numbers.
“In terms of these fines, which apply daily at a significant amount and are a result of persistent non-compliance, I definitely predict that there will be more coming through, especially if you think about how many employers received the initial compliance fines in the last period.”
There were four escalating penalty notices noted in the last quarterly report published by the Pensions Regulator. Ms Abrahams added that as fifteen hundred firms got compliance notices, the fact just four were moved to escalating fines is just a matter of “reporting delay”.
A total of 1,139 compliance notices were issued in the last quarter of 2014, instructing employers to remedy a contravention of one or more of their duties or risk a fine or further action.
Ms Abrahams explained: “The Pensions Regulator doesn’t have the resource to hear explanations or excuses from smaller employers as there are too many. As such, non-compliance will have immediate consequences whether it is accidental or persistent.”
A Freedom of Information request by Aon Employee Benefits shed more light on the first four escalating penalty notices, with fines relating to one large employer at £5,000 per day, two medium-sized firms at £2,500 per day and one small employer at £500 per day.
Large employers are categorised by having 250 and more people, medium employers have 50 to 249 and small employers have fewer than 50 people.
Ms Abrahams said that with hundreds of thousands of employers reaching their staging dates every quarter in 2016, there will be rush to source an auto-enrolment supplier. At the same time, larger employers are going through re-enrolment as they reach their triennial review dates, changing providers whilst the small and micros will be looking for providers first time round.
“Auto-enrolment is now business as usual and they understand that they should be spending money to get the solution right. However, many smaller employers still continue to underestimate the level of work involved in becoming compliant.”