Auto enrolment is proving a challenge for many, especially SMEs – and now The Pensions Regulator (TPR) is getting tough. We explore the mistakes inexperienced payroll workers are making most often.
In October, four members of a Derby-based recruitment company became the first people in the UK to be given suspended prison sentences for flouting pensions auto enrolment rules. As MoneyWeek reports, theirs was no unfortunate misunderstanding of the law. Rather, they had illegally plotted “to opt staff out of the company pension scheme.” The company itself was fined more than £280,000.
This sort of criminal activity appears to be rare, but TPR fines for more innocent mistakes are increasing. In the last financial year, fines totalled £42 million were levied (three times the previous year’s figure) and a disproportionate number of companies fined were SMEs.
It’s not as if these companies are putting their auto-enrolment submissions together on the back of a fag packet. Many use specialist payroll software, but the GIGO principle (garbage in, garbage out) appears alive and well. The problem isn’t with the software; it’s with everything around it.
So if you are a medium sized business and you’re doing any of the following, you might like to look again at the way you manage your auto-enrolment, or consider outsourcing it to remove the risk altogether.
Are all the personal details in your payroll system correct? This autumn, FT Advisor reported on a study by Integration platform Pensionsync which looked at contributions to 10,000 schemes and found issues with 50% of them. these included “contribution amounts that are too high or too low, payments made for workers who do not belong to the scheme or have opted out, or incorrect pay period dates, among other mistakes.”
For many SMEs, meeting the auto-enrolment requirements and deadline was something of a mad scramble. In the aftermath, there’s some evidence to suggest employers have breathed a collective sigh of relief and sat back. The reality, however, is that employers have onerous ongoing duties. Regular updates and data submissions, communication and pay reference period reviews are all continuing responsibilities.
How do you know if you’ve failed to meet your auto enrolment compliance obligations? For too many SMEs, the answer appears to be when the TPR fines them. It may take a long time for the TPR to carry out a spot check on your business, by which time any auto enrolment problems may have gone unnoticed for years. By which time, the fine and the cost of putting things right could be painfully expensive.
According to MoneyWeek, “many firms… have given responsibility for complying with the law to individuals and advisers not qualified to do the job.” Auto-enrolment isn’t the sort of bolt-on duty to be added to the end of an unqualified member of staff’s job description. It is a distinct and complex discipline and one that even many experienced in-house payroll staff may find a step too far.
Outsourcing removes all of the above issues at a stroke. Compliance stops being a ‘fingers crossed’ exercise and instead becomes a certainty. Experts handle the auto-enrolment and, when you outsource the payroll too, they handle the data that feeds it, so you know the calculations are built on quality information. Outsourcing auto-enrolment ensures that the momentum required to keep meeting your obligations is maintained. And if the outsourced provider does ever make a mistake – well, the buck stops with them, not you.
Make meeting your ongoing auto-enrolment obligations easy. Talk to our experts now.