Why is understanding automatic enrolment pensions so important?
Automatic enrolment was introduced by the government to legally enforce every employer to create a pension scheme and offer contributions to their employees; it is the biggest change to pensions within the last century.You may have noticed several celebrity faces help run the campaign such as Theo Paphitis, the Dragons’ Den star, and Karren Brady, Alan Sugar’s assistant.
It is strongly suggested that preparations for auto enrolment begin 18 months prior to receiving your staging date – this is the date at which your duties as an employer begin. The legislation is extremely complex and easily misunderstood; some of the largest companies have all ready faced huge fines and warnings of non-compliance, despite their budgets and expansive HR departments.If you, as an employer, fail to correctly comply with the legislation, the Pensions Regulator can dispense an on-the-spot fine of up to £400. In order to prevent organisations from just paying the initial fine, further daily fines are levied for none compliance, varying in the size of your workforce.
So, a business with 5 -49 employees could face a daily fine of up to £500 for non-compliance. This may seem harsh, but the aim is to prevent the employer from financially benefiting from paying a singular on the spot fine.James Fox at Ashton Hoyle said: “These eye-watering fines will be upon employers that show ignorance to compliance. In the current economic climate, many businesses cannot afford not to comply. It is important that businesses do not ignore the legislation and that they may wish to seek professional advice.” These are just a few of the preparations that employers must make to meet the criteria of compliance:
- Full staff Audit
- Scrutinising current schemes or shopping around for the best provider
- Organising payroll with pension provider
- Give clear-cut costs of contributions
- Provide communications to all staff members
- On going assessment of the workforce from payroll, enrolling employees whereby their eligibility status changes.