While many employers, especially those in the education sector, are well versed with the auto-enrolment requirements, it seems that many are falling short.
The Pensions Regulator (TPR) has undertaken its first prosecution of a company for failing to comply with the law on workplace pensions. The TPR took action against the bus company, Stotts Tours (Oldham) Limited, and its managing director for deliberately avoiding giving their staff workplace pensions.
TPR found that 36 staff from Stotts Tours (Oldham) should have been automatically enrolled into a pension scheme. TPR decided that the company’s failure to do so was deliberate and merited the criminal prosecution of both the company and the managing director.
The company and the managing director pleaded guilty to the criminal charges against them and will be sentenced on 14 December 2017. TPR is separately pursuing the company for £14,000 in civil fines imposed for non-compliance.
This case highlights the possible criminal sanctions for non-compliance. TPR has a range of powers and it seems to be clamping down on employers. New data released by TPR in November 2017 shows nearly a 50% increase in the number of compliance notices issued to employers compared to the last quarter for failing to meet automatic enrolment duties.
So what are the requirements?
The Pensions Act 2008 states that an employer must auto-enrol eligible workers into a pension scheme and make contributions to it. The pension scheme must meet certain tests to be a valid enrolment scheme. For example, the Local Government Pension Scheme and the Teachers’ Pension Scheme meet the test. Certain information must be given in writing to a jobholder who has been auto-enrolled.
Eligible workers can opt out but, every three years, the employer must auto-enrol those eligible who had opted out.
It will be particularly important to check that no steps are taken that would result in an eligible worker no longer being an active member of a qualifying scheme or the scheme ceasing to be a qualifying scheme. This could arise, for example, if there is a company reorganisation or merger.
There are also a range of measures to protect eligible workers against employers who try to circumvent their auto-enrolment duties. For example, an employer must not offer financial inducements to its workers to opt out of a workplace pension scheme. This may include offering a higher salary, a promotion or a one-off bonus in exchange for opting out. TPR can impose a compliance notice if an employer takes any step to induce a worker to opt out.
Furthermore, workers have the right not to suffer any detriment by his/her employer in relation to the auto-enrolment duties. An employer might fall foul of this if, for example, action is taken to enforce a worker’s auto-enrolment rights, or if an employer is prosecuted for an auto-enrolment offence, and the employer then imposes a detriment on a worker. Detriment might include a pay cut or removal of some benefit from the worker. It is therefore essential that employers comply with the auto-enrolment duty, and do not try to ‘get around’ the duties in any way.
An offence is committed by an employer who wilfully fails to comply with the auto-enrolment duty. The law also states that where this offence is committed with the consent or connivance of an officer (e.g. director, manager, secretary) of the company, or is attributable to the officer’s neglect, then the officer is also guilty. This is why the managing director of Stotts Tours (Oldham) was prosecuted.
The maximum punishment for this offence is two years in prison.
It is clear that employers’ failure to comply with auto-enrolment law can have severe consequences. To avoid falling foul of TPR, it is important to ensure your company is compliant.