Auto-erolment spot checks

The Pensions Regulator (TPR) has been making spot checks on employers about auto-enrolment across the UK since March.

It is looking at using its statutory powers to obtain information and enter premises. The focus is on employers that TPR judges to be at risk of failing to meet their auto-enrolment duties. These can be employers that failed to lodge a declaration of compliance on time or declared fewer jobholders than TPR expected. Other employers might have been reported by their own workers or have failed to respond adequately to TPR's formal information requests.

All employers in existence in early 2012 have passed their staging dates and most newer employers must also comply with auto-enrolment. TPR is now well-placed to look back and identify non-compliant employers. It has also warned that all employers set up from October 2017 must comply from day one.

Failing to comply with TPR's information gathering powers, including giving false or misleading information, can lead to a civil fine or criminal prosecution.

So it is vital that an employer takes advice promptly if it receives a request for information from TPR.

TPR enforcement action

TPR has published press releases about its enforcement powers in action. A solicitor and his firm were ordered to pay fines and costs of more than £16,000 for failing to provide documents required by an information notice. In another case reported the next day, a former trustee was ordered to pay £6,500 in fines and costs for refusing to comply with an information notice. Both cases were criminal prosecutions. TPR's message was clear: it will not tolerate failure to comply with an information request.

Other civil powers at TPR's disposal include the power to issue a compliance notice that requires an employer to take remedial action by a stated date. Failure to comply is likely to result in a fixed penalty notice for £400. Repeated non-compliance can lead to an escalating penalty notice requiring compliance or else payment of an increasing fine.

Escalating penalties increase by a fixed amount for each day of non-compliance. The amount generally depends on the number of workers the employer has. Between 250 and 499 workers, the daily amount is £5,000. Those with 500 or more pay £10,000 a day. These fast rising fines tend to be used as a last resort.

Johnsons Shoes Company

TPR published a press release about Johnsons Shoes Company, an employer it had issued with penalty notices. In April 2015, seven months after Johnsons failed to complete a declaration that it had complied with its auto-enrolment duties, TPR issued a notice ordering it to do so by the end of June. It failed to do this and received a fixed penalty notice for £400. In November this became an escalating penalty, increasing by £2,500 a day. Johnsons finally complied in December when the penalty was £40,000. TPR enforced the debt through the courts.

Any employer that is contacted by TPR alleging non-compliance with its automatic enrolment duties should seek advice without delay. Not all cases are as clear as Johnsons. Some concepts are not closely defined: the claims by workers in the gig economy is one such grey area. A detailed review of the circumstances of the employer and its workers and of any existing pension arrangements may be required. Ideally, this should not wait until a penalty notice (particularly of the escalating variety) has been issued, because reviews and appeals against notices are time limited (within 28 days of issue).

Also, once a review of, say, a fixed penalty notice has been requested, an escalating penalty notice may not be issued. Tackling areas of non-compliance promptly with professional help, and in dialogue with the TPR, is likely to achieve a better result.