The payroll legislation that affects your business – part two

14 February 2018

In the second of our three-part payroll legislation blogs (click here for part one), we look at auto-enrolment – what is it, why do employers need to comply and what penalties do they face if they don’t?

All employers must now operate an automatic enrolment scheme if they have employees. The majority of employers will have now ‘staged’ (ie. their auto-enrolment duties have come into effect), with only a few left to stage in February 2018, and all new employers must now have a staging date from their first pay date.

Employers must also ensure that they are operating the pension scheme correctly and taking the correct deductions. This includes sending the correct communications to employees when necessary and ensuring that all pension payments are paid to the pension company accurately and on time. It also means that the employer must contact The Pensions Regulator to ensure that they have completed the necessary forms required by them.

Employers are not allowed to induce their employees to opt out or cease membership, and must not in any way influence an employee’s decision on whether or not they have pension contributions.

The Pensions Regulator has the right to inspect any employer it believes to be failing to operate an automatic enrolment scheme correctly. The Regulator will issue fines for several different reasons, including:

  • A fixed penalty notice of £400 if you don’t comply with statutory notices or if there is evidence of the law being breached.
  • An escalating penalty notice imposing a penalty of £50 – £10,000 per day for each day that you are non-compliant (depending on how many workers you employ).
  • A prohibited recruitment conduct penalty notice at a maximum of £5,000.
  • A civil penalty notice (where contributors have not been paid). The relevant fine can be up to £5,000 per individual and £50,000 per organisation.

Failure to comply after The Pensions Regulator has intervened can result in the Regulator taking legal action against you, and you may face criminal prosecution and prison time of up to two years.

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