The Pensions Regulator is continuing its crusade against employers who do not comply with their auto-enrolment duties. Those who think they are small enough not to feature on the Regulator's radar would be well advised to think again.

On 1 April this year the first of the small and micro employers (i.e. those with fewer than 50 employees on their PAYE system as at 1 April 2012) will reach their auto-enrolment staging date.

This may result in panic for some employers. Perhaps we should be more concerned about those employers who are not yet panicking – they may be leaving it too late!

We have now seen almost all of the large and medium-sized employers reach their staging date. There is strong evidence medium-sized employers have not been as well-prepared as larger ones. The Regulator reported last month that:

  • the total number of employers fined for failing to comply with their auto-enrolment obligations reached 169 by the end of 2014. One of the most concerning statistics is that 166 of those 169 fines were issued in the last three months of 2014; and
  • furthermore, the total number of compliance notices issued to employers to remedy a contravention of one or more of their auto-enrolment duties reached 1,316 by the end of 2014 with 1,139 of those notices issued in the last three months of 2014.

Is this a downward spiral? Are small and micro employers even less prepared than the medium-sized employers? The Regulator certainly seems concerned about this being a possibility, so much so that it has launched a new campaign. This will see the Regulator writing to over 1.5 million small and micro UK employers over the next few months to:

  • remind them of their staging date (employers are already told their staging date 12 months in advance);
  • remind them of the duties to which they are about to become subject; and
  • request an email address from the employer, so that the Regulator can email them with regular updates and reminders.

Many of the fines related to the failure of employers to complete a "declaration of compliance" in relation to their auto-enrolment duties. It would appear that not all employers have realised that it is mandatory to complete such a declaration. The Regulator is now conducting a proactive drive in relation to completion of declarations of compliance. We expect that this is something they will be including in those email updates to small and micro employers.

Research carried out by the Regulator indicates that workplace pensions are "becoming the norm, with the majority of small and micro employers indicating that they believe it to be a 'good idea' ". Thinking something is a "good idea" and being well-prepared to action it are, of course, two different things.

The Regulator has expressed concerned at the standard of advice that small and micro employers which are suffering from insolvency will receive, based on its expectation that these businesses are likely to rely on high street advisers who have less resources than the larger advisers upon whom the larger employers have tended to rely. In our view this is just as likely to apply to general auto-enrolment advice, and isn't limited to insolvency scenarios.

Auto-enrolment has come a long way. There are now more active members in money purchase schemes than in final salary schemes, a statistic that has clearly been impacted by the implementation of auto-enrolment. It will be interesting to see how the small and micro employers cope with their new obligations, and how many more fines and compliance notices will be dished out by the Regulator over the next few months.

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