Why is the Auto Enrolment message failing to get across?
By Simon Palmer of Qtac Payroll
It has been widely reported over recent months that the first quarter of 2017 saw a significant increase in the number of businesses that either missed their Auto Enrolment staging date or only started the process within a short period prior to it. Aviva and Now Pensions both published statistics from their own experiences that show around 1 in 5 businesses not being adequately prepared to meet their obligations.
The trend is backed up by statistics published by The Pensions Regulator which show a sharp increase in the number of Compliance Notices issued (8,955 in first Quarter 2017 bringing the total issued to 40,206) and fixed penalty notices (4,673 in the same period with an overall total of 14,502).
Their latest report also publicises some startling case studies of where Regulatory Intervention has been taken, one in particular resulting in a fine of £40,000 plus court costs for a shoe company that cited “work pressures” for their failure to meet their duties on time.
It seems therefore, that despite significant publicity around the changes and implications of non- compliance over many years, the message just isn’t getting through.
So what are the reasons behind the numbers and how can the 700,000 small firms that are still to stage prior to April 2018 ensure they don’t join the statistics?
Why are companies not taking action in time?
The most obvious reason for the apparent inaction is that smaller businesses don’t have a dedicated HR or Payroll function as larger companies do. The responsibility for compliance therefore falls on the business owner or member of the management team who doesn’t have the time or isn’t equipped to know where to start and so it ends up being left on a to do list until the last minute or worse missed altogether.
Another common cause is a general misunderstanding around whether the legislation relates to their business or not. Owner managed businesses with only 1 or 2 Directors as employees can often be unsure if they need to take action whereas those without any current eligible employees can often not realise that they still need to put a scheme in place and continually assess their staff in case their position changes.
Finally, confusion around the various roles and responsibilities within the process can leave some businesses mistakenly believing that their payroll software or outsourced payroll provider will take care of a wider range of activities than is actually the case. They therefore miss specific activities or deadlines that were their responsibility in the belief that they are being dealt with elsewhere on their behalf.
Regardless of whether action isn’t taken though lack of time, burying their head in the sand or a general misunderstanding of the process, the penalties for non-compliance can be great.
3 Key things that businesses should do now to ensure they take action in time
- Understand the timings. Whilst this seems obvious it is surprising how many businesses are not aware either of their staging date or the amount of time it can take to arrange everything. We recommend starting the process at least 3 months in advance.
- Be clear on roles and responsibilities. Understanding their specific responsibilities and the process that needs to be followed is key. Also being clear on how much support their payroll software will provide as it varies considerably between providers.
- Speak to a Professional. Whether their accountant, outsourced payroll provider (if using one) or financial advisor the sooner they look for advice and support the less likely they are to miss a crucial deadline or stage in the process.
What can you as their accountant do to assist?
The likelihood is that, whether you manage their payroll or not, you have been speaking to them about Auto Enrolment for many years at this stage. It is important that you don’t stop now, if anything with tougher enforcement being introduced for non-compliance, you need to increase the communication you have with them to make sure they take appropriate action.
If you manage their payroll then make sure you have processes in place to handle short timeframes as well as the additional ongoing administration it brings. Take the time to review your payroll software; AE Management functionality and process automation are the key to ensuring you can provide efficient and accurate support across multiple clients.
One area that many businesses need additional support is around the selection of a suitable pension scheme. Using platforms such as Pensions. Market are an easy way for your clients to select the right provider.