QUESTION: I run a small business with 12 employees and I have received my staging date for pensions auto enrolment. What impact will this have on my business?
ANSWER: To encourage more people to save in pension schemes, the government has placed greater responsibility on employers to provide access to pension provision. Up until October 2012 there was no requirement for an employer to pay employer contributions into a scheme. There was also no requirement for the employee to enter an employer provided scheme.
For 2017, more than 750,000 employers face new responsibilities to contribute to their staff pension schemes. Small business owners who have yet to act, should do so now to avoid large fines and potential prosecution.
From January to March this year, The Pensions Regulator (TPR) expects almost 150,000 small businesses to reach their staging date. This will represent a peak for the number of businesses expected to comply with the previous Government’s automatic enrolment legislation introduced in 2012.
The TPR has recently been flexing its muscles as increasing numbers of small businesses have been leaving it until the last minute to prepare for their staging date and then failing to meet their obligations. This may be because unlike larger organisations, smaller businesses often do not have the financial resources or staff dedicated to look after their payroll and pensions commitments.
In its most recent Compliance and Enforcement Bulletin, the TPR reported it issued over 15,000 compliance notices, 3,700 fixed penalty notices and almost 600 escalating penalty notices from July 1 to September 30 2016.
A number of employers have unsuccessfully contested their fixed penalty notices at a tribunal, citing their non-compliance was unintentional and that they had a ‘reasonable excuse’.
Among the circumstances given in their defence were illness, being short-staffed and confusion between the employer and payroll administrator. HM Revenue & Customs (HMRC) also uses the idea of a reasonable excuse for appeals against tax penalties, but the tribunal has made it clear that HMRC and the TPR are two distinct regulators.
The same basic principle may apply, in that a reasonable excuse is a factor that was unexpected or not within the control of an employer and prevented them from meeting their statutory duties. However, as automatic enrolment and tax duties are different, what may be deemed a reasonable excuse for HMRC, may not be enough to avoid an automatic enrolment penalty.
For example, the TPR is far stricter than HMRC and will not accept IT issues as a reasonable excuse because it offers an alternative telephone service and issues a series of reminders to employers ahead of their staging dates.
Therefore, the best solution is to start preparing for auto enrolment as soon as possible. Business owners who are required to provide a qualifying pension scheme but fail to do so, could face a £400 fixed penalty from the TPR, escalating to daily fines set at a minimum of £50 per day, with the possibility of civil penalties and court action.
- Janette Burns (j.burns@pkffpm. com) is associate director at PKFFPM (www.pkffpm.com). The advice in this column is specific to the facts surrounding the question posed. Neither The Irish News nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.
