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Auto-enrolment – the small employer

The staging dates for automatic enrolment for employers with less than 50 employees started on 1 June 2015 and 1.2 million small and micro employers will commence staging over the next three years.

The first step to compliance with the new regime is to know your staging date which is the date on which an employer becomes subject to the obligation to enrol all eligible job holders into a qualifying pension scheme. An employer’s staging date depends on the number of employees that were in its PAYE scheme on 1 April 2012. You can find out your staging date on the Pensions Regulator’s website

The Pensions Regulator recommends that employers start to plan 12 – 18 months in advance of their staging date to ensure that they have sufficient time to carry out all the planning and preparation required in order to be compliant.

In preparing for the staging date, an employer is required to undertake a number of tasks including:

• Carrying out an assessment of the workforce to identify the categories which employees fall into which will determine what action is required to be taken in relation to them.

• Considering and deciding what pension scheme it will use. If the employer already has its own scheme this could be used as long as it meets the required standards or could be amended in order to meet these.

• Considering whether it intends to make use of the postponement provisions which allow automatic-enrolment to be postponed for up to three months.

• Arranging for member communications to be issued.

• Putting in place systems and procedures for dealing with the initial and ongoing requirements including joining, opting-in, opting-out and ongoing monitoring of employees against the categories.

The Pensions Regulator has the power to fine employers who do not comply and in the first three months of this year 198 fixed penalty notices have been issued to employers for either failing to meet deadlines or to comply with the statutory communication requirements. This represents a worrying trend, previously a total of 169 fixed penalty notices had been handed down since the introduction of auto-enrolment in 2012 and there is wide speculation that there will be an explosion in these non-compliance figures and sanctions now that smaller employers are becoming subject to the requirements.

A fixed penalty notice imposes a fine of £400 and sets out the action that the employer is required to take to comply, if the requirements set out in the notice are not met within a reasonable time a daily penalty can be imposed until compliance is achieved, for an employer with between 5 and 49 employees the daily penalty is £500.

Our checklist provides further information about auto-enrolment.

If you have questions about auto-enrolment please Get in Touch

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Legal news, views, trends and tools for HR Professionals. Stay ahead. Go further