The Pensions Regulator (TPR) has issued a penalty of £40,000 against an employer for failing to comply with automatic enrolment. It has also "named and shamed" other employers for failing to comply and is threatening criminal prosecutions.
Johnsons Shoes Company's staging date for automatic enrolment was 1 May 2014, meaning the company had up to three months to enter any qualifying staff into a pension scheme. However, Johnsons did not enrol its workforce in time and the saga developed as follows:
30 Sep 2014: Employers must declare their compliance with automatic enrolment within 5 months of it beginning to apply to them. Johnsons failed to complete its declaration of compliance.
30 April 2015: TPR issued Johnsons with a "compliance notice", a statutory notice ordering it to complete the declaration of compliance by 29 June 2015 (and therefore also ensure that qualifying staff were correctly enrolled).
3 July 2015: After contacting the company with a number of reminders, TPR issued Johnsons with a £400 fixed penalty notice for failing to respond to the compliance notice and ordered the company to complete its declaration of compliance by 30 July 2015. Johnsons asked for a review of the penalty, blaming the pressures of work for failing to comply. This was rejected by TPR as reminders had been sent to Johnsons in the 12 months leading up its staging date.
25 September 2015: Johnsons paid the £400 fixed penalty notice but still did not complete its declaration of compliance.
9 November 2015: TPR issued Johnsons with an escalating penalty notice (EPN) for failing to comply with the 30 April compliance notice. The company was told the fine would increase by £2,500 per day from 7 December until satisfactory evidence was provided that the declaration of compliance has been completed.
(An escalating penalty varies between £50 and £10,000 per day according to the number of employees in a company. The daily rate of £2,500 applies to employers with between 50 and 249 employees.)
23 December 2015: Johnsons provided the evidence of compliance requested by TPR, including a system allowing for the backdating of contributions, and the EPN stopped accruing. The EPN had escalated to £40,000 by this time.
Johnsons told TPR that they would not pay the penalty. TPR treated this as a request for a review of the EPN, but rejected it as it was received outside the 28 day window for requesting reviews and there were no exceptional circumstances. Johnsons still refused to pay so, after issuing a number of reminders, TPR commenced debt recovery proceedings. Johnsons initially tried to defend the action, but paid the £40,000 penalty plus £2,000 court costs, when faced with an application by TPR to strike out their defence.
Shortly after issuing its report about Johnsons, TPR issued its Automatic Enrolment Compliance and Enforcement Quarterly Bulletin. This revealed that TPR issued 4,673 fixed penalty notices in the 3 months to 31 March 2017 and 1,043 EPNs in the same period. This brings the total number of penalty notices issued to over 17,000.
In addition, TPR has also "named and shamed" a further 20 employers who have been issued with EPNs totaling more than £60,000 and remain non-compliant, and 13 employers who have failed to pay EPNs of collectively more than £220,000 and who are facing court orders demanding payment. TPR has also warned that further enforcement action may be considered, including prosecution for the criminal offence of willful failure to comply with employer's automatic enrolment duties. Individual directors or managers can also be prosecuted for this offence.
TPR is continuing to be active in meeting its statutory objective "to maximise compliance" with automatic enrolment. However, in doing so it is giving employers assistance and every opportunity to comply: it was some 9 months after the deadline for the declaration of compliance before the first penalty notice was issued to Johnsons.
It reinforces the message that employers need to plan for automatic enrolment. From 1 October 2017, new employers will be subject to automatic enrolment immediately, but will be able to defer the enrolment of workers for up to 3 months.