Pensions  

Whistleblowing surges as SMEs falter on auto-enrolment

Whistleblowing surges as SMEs falter on auto-enrolment

Whistleblowing reports to The Pensions Regulator increased by almost a third over the last year, while enforcement actions more than quadrupled, as small and medium-sized enterprises struggled to meet auto-enrolment requirements.

The regulator received 2,545 tip-offs about rules breaches in the 2015/16 tax year, up 29 per cent on the previous year, according to figures obtained by law firm Clyde & Co.

Enforcement actions against employers rose to 8,812, up from 1,947 the previous year.

Non-compliant employers may be liable to fines as high as £10,000 a day, the law firm warned.

Auto-enrolment requirements came into force in 2012 for companies with more than 120,000 employees. Since then, the requirements have gradually extended to smaller employers, in a staging process due to be completed by February 2018.

Clyde & Co. head of pensions Mark Howard said non-compliance issues are likely to get worse over the next two years with the volume of employers who must auto-enrol their employees, warning very small employers without large management teams will find compliance particularly challenging.

“SMEs yet to face their enrolment deadlines are not going to have the support of HR departments to help them deal with the administrative headache of enrolling their employees into a pension scheme,” he said.

“The regulator has put out a lot of guidance aimed at SMEs, but even so, it’s not surprising we are seeing the number of whistleblowing and enforcement actions increase as the number of employers subject to auto-enrolment grows substantially.”

Employers were warned in April that if 28-day escalating penalty notices were ignored, they were at risk of being fined £50 a day by the Pension Regulator for businesses with one to four staff, or £500 a day for those with five to 49 employees.

Failing employers have already been hit with a record number of fines during the first quarter, with 96 escalating penalty notices, bringing the total to 127. One unnamed firm was fined £10,000 for failing to meet its auto-enrolment deadline, even though it had engaged a financial adviser.

Nigel Sycamore, director at auto-enrolment specialist adviser Clear Workplace, said many smaller businesses have not yet accepted the new requirements. “We still find at the smaller business end there are some employers who can’t believe that this applies to them as it does to the likes of Virgin and Marks & Spencer.”

He said in smaller businesses where management is stretched, auto-enrolment often “falls between the cracks”. However, he said the regulator had got the balance between carrot and stick “about right”.

“The Pensions Regulator will do everything it can to help people comply. But in the end this is about people’s right to a pension, so if businesses refuse to comply, they need to be fined.”