Auto-enrolment payroll services

Small businesses fined for not complying with auto-enrolment payroll services

When the government introduced auto-enrolment in October 2012, the intention was that all businesses would have their staff enrolled by April 2017 – and any new businesses by February 2018. So auto-enrolment into Workplace Pension schemes has finished its rollout, and applies to businesses of every size. Without exception.

But recently, a freedom of information request made to the Pensions Regulator discovered that the number of employers encouraging employees to opt-out of their pensions - so that they could avoid making their employer contributions - had risen by 68%.

This is even more worrying because the government predicted that as many as 28% of employees might opt-out of auto-enrolment. But in fact, even low income households have adapted their budgets to ensure they can contribute towards their pensions.

Today, auto-enrolment opt-out rates are running at less than 10%.

The number of pension pots being filled has increased by 50% since the introduction of auto-enrolment, and the majority of these are from small businesses in the private sector. Even the increase from 1% employee contributions to 3% didn’t see many employees opting out.

The Department for Work and Pensions reported that employees saved an extra £6.9 billion into workplace pensions in 2017-18 tax year. But not everything is rosy. Back in 2012, pension contributions were at a record high of 9.7% of the average UK salary. In 2017, this dropped to just 3.4%, with 1.3% coming from employees and 2.1% from employers.

To make matters even more complicated, especially for small businesses, this changed again in April 2018 with minimum contributions now at 5%. This will rise again in April 2019 to 8%. Yet whilst all the evidence is pointing towards employees adapting rather well to auto-enrolment, there have been recent reports that small businesses are still not being very quick to comply and many are failing to meet their obligations under auto-enrolment. The Pensions Regulator has been steadily auditing small businesses and can quickly spot those not complying, resulting in fines and penalties from £400 to £10,000 which obviously, many struggle to pay. In a recent update, it was reported that almost 28,000 compliance notices were issued to small businesses between April-June 2018.

There is still work to be done on auto-enrolment and the onus remains on the small business to ensure they are running a legitimate and properly administered pension scheme with regular and accurate contributions for all staff.

Has your small business got auto-enrolment covered? If you decide to work with Proto Payroll services, we’ll guarantee your business will be auto-enrolment compliant.

Payroll services allow you the freedom to focus on growing your business saving you time and energy. The best way forward is to find one which offers a fully managed payroll service for start ups and small businesses so you have complete piece of mind.

We offer online payroll services throughout the UK and have the team, the time and the expertise to help you at Proto Payroll. For an informal chat, please email tom.hornbuckle@protopayroll.co.uk or complete a free quote using our payroll calculator on our website.