One in seven small businesses breaks AE rules

In the final quarter of 2016, 14 per cent of businesses enrolling their employees in an Aviva auto-enrolment scheme did so after the deadline had passed.

That was 14 times greater than the figure in the first quarter of 2016, prompting Aviva to describe it as "a worrying trend". 

The report also found 38 per cent of business that did enroll on time left it until "the last minute".

Less than half (48 per cent) prepared for auto-enrolment "well in advance".

Aviva's experience mirrored that of The Pensions Regulator, which has seen the number of compliance notices it has had to issue skyrocket in the last year, as small and micro businesses reach their staging date. 

Auto-enrolment is now becoming a reality for very small companies which have many priorities and not necessarily the resources to deal with them all.Andy Beswick

The sudden deterioration coincided with a flood of the UK's smallest businesses entering the auto-enrolment regime. A further 500,000 expected to join in 2017.

Andy Beswick, managing director of business solutions at Aviva, said that while the trend was "something we need to keep a close watch on", it was "understandable".

He said: "Auto-enrolment is now becoming a reality for very small companies, which have many priorities and not necessarily the resources to deal with them all.

“We understand this and we’re doing all we can to help these companies. We can help those companies that have missed their deadline and we’ve set up a simple online process to get a workplace pension in place.

"The last thing anybody wants is to see small business owners getting fined because they haven’t got their workplace pension set up in time.”

In the third quarter of 2016, the regulator issued 15,073 compliance notices out of a total of 26,040 since auto-enrolment began in 2012.

Of those, 3,728 were issued with a fixed penalty notice, which comes with a £400 fine.

However, only 576 businesses were issued with an escalating penalty notice, which comes with a fine of between £50 and £10,000.

Over the period, The Pensions Regulator used its powers 19,825 times, compared with 34,703 times since auto-enrolment's inception.

The Pensions Regulator warned employers that excuses for non-compliance such as illness, being short-staffed, or confusion between employers and their advisers, were not "reasonable".

"We recognise that employers have unique circumstances and challenges, but the law is still the law. 

"Employers who are struggling should contact us, we are here to help - do not wait for a fine," Charles Counsell, TPR's executive director of automatic enrolment, said at the time.

james.fernyhough@ft.com