May 2021

The payroll mistake that could cost you (and how to avoid a fine)

At the beginning of the pandemic, we saw a sudden rise in the number of employers who were not complying with their auto enrolment duties. The number of warnings issued to employers who failed to comply with their auto enrolment duties increased by almost 200% for the months of July, August and September 2020, compared to the previous quarter. The Pension Regulator (TPR) introduced more flexibility at the beginning of the pandemic for employers who may be struggling, allowing them more time to ensure their pension contributions were up to date.

This rise in non-compliance at the start of the pandemic coincided with a dip in both employee and employer pension contributions. Although auto enrolment responsibilities remained in place throughout the pandemic, including for employees who had been furloughed, some employees chose to opt out or reduce their contribution levels. As the country begins to reopen, pension contributions have now returned to pre-coronavirus levels. Now more than ever, employees are realising how important it is to save for their futures.

As levels of enforcement are also now back to normal, it is important that employers are staying on top of their auto enrolment duties.

What happens if you do not comply with your auto-enrolment duties?

1. You will receive a warning letter informing you that you must take care of your duties by a certain deadline.

2. If you do not meet the deadline, you will receive a statutory notice telling you to comply with your duties and/or pay any contributions you have missed or are late in paying. You may also be asked to pay any of your staff’s unpaid contributions and interest on missed contributions.

3. If you fail to comply with a statutory notice, you will be issued a penalty notice or you may be sent a fixed penalty notice. The fine is fixed at £400 and must be paid within the period set out in the penalty notice.

4. If you still do not comply with the statutory notice you may be sent an escalating penalty notice. This gives you a new deadline to comply, after which you will be fined at a daily rate of £50 to £10,000, depending on the number of staff you have.

In the year ending March 2020, TPR issued a total of £23.1m worth of fines to employers who didn’t comply with their auto enrolment duties, with one employer fined £350,000 for failing to re-enrol staff into its workplace pension scheme.

Of course, sometimes employers can make genuine mistakes when trying to keep up with auto enrolment and re-enrolment duties, however, these mistakes can be easily avoided when you use a payroll software that caters for auto enrolment and re-enrolment.

Use a payroll software that makes auto enrolment easy

With BrightPay, once your auto enrolment duties begin, the software automatically assess your employees by looking at their age and qualifying earnings. Once assessed, notifications within the software will inform you of what you must do to comply with your auto enrolment duties.

If you are notified that you have eligible jobholders who must be enrolled into a scheme, you can have them all enrolled in just a few simple clicks as BrightPay allows you to enrol multiple employees at once. When enrolled, BrightPay will automatically generate letters, informing employees that they have been enrolled. The letters can be sent by email, printed, or shared via our online portal, BrightPay Connect, in a matter of seconds. Sharing employees’ letters through an online portal is not only convenient, but it also helps the environment by cutting down on paper. Read here about BrightPay’s sustainably efforts.

Auto enrolment is an ongoing responsibility, and your duties don’t end once you have enrolled your staff and sent them their letters. As employees get older or their qualifying earnings change, there may be new duties you need to perform. Luckily, BrightPay will closely monitor any changes and notify you of any new duties.

On the three-year anniversary of when your auto enrolment duties first began, you will need to re-enrol staff. Failure to re-enrol can result in a fixed penalty from TPR. BrightPay will notify you of when employees are due to be re-enrolled into a pension scheme, meaning you don’t need to try and remember this date yourself.

To find out more about how BrightPay can help you stay on top of your auto enrolment duties, check out our videos on auto enrolment or book a free online demo of our software to see it for yourself.