Businesses in breach of the auto-enrolment duties are ‘named and shamed’

All employers in the UK must automatically enrol eligible staff members in a workplace pension scheme if they are not already enrolled in one. The auto-enrolment duty came into force on 30 June 2012 requiring companies to comply with the auto-enrolment duties over a five-and-a-half-year period beginning from 1 October 2012.

 Staff eligible for auto-enrolment must be: 

  • classed as ‘workers’;

  • at least 22 years old;

  • not have reached state pension age;

  • earn more than the earnings trigger i.e. at least £10,000 per year; and

  • work, or normally work, in the UK.

The rules applied staging dates for compliance with large employers being affected first. Companies with 250 or more staff members were given between 1 October 2012 to 1 February 2014 to comply with their new duties, whereas, employers with less than 30 staff members were given until between 1 April 2016 to 1 April 2017 to comply.

As soon as a worker becomes eligible for auto-enrolment the employer must auto-enrol the worker in a workplace pension scheme within 6 weeks from either the employer’s staging date or the date on which the jobholder meets the eligibility criteria, if that is later.

If an employer auto-enrols its eligible staff members in a qualifying scheme operating on a defined contribution scheme (i.e. where the employer and employee agree on a set amount to be contributed to an individual pension fund) the statutory minimum contribution for an employer is 1% of the worker’s qualifying earnings, on the basis that the staff member also pays 1%. The Government has set out staged increases in the employer and employee contribution levels over the next few years.  From 6 April 2018 to 5 April 2019, the employer’s contribution into a defined contribution scheme will increase to 2% on the basis that the employee contributes 3% and from 6 April 2019 onwards it will increase to 3% provided that the employee contributes 5%.

Companies have an ongoing duty to ensure that members remain active in the workplace pension scheme. Workers however have a statutory right of opting out of the scheme at any time. However, should they change their mind later in the future, they have the option of re-joining the workplace pension scheme. The legislation however only enables workers to do this once in a 12-month period.

Auto-enrolment of workers into a workplace pension scheme is a legal requirement, therefore non-compliance will result in severe consequences. The Pensions Regulator has recently named those companies who have failed to meet their auto-enrolment duties and who subsequently have then failed to pay a fine issued in respect of non-compliance.

The Pensions Regulator is taking a firm approach to companies that continue to break the law. The Executive Director has reportedly said that to allow employers to evade liability is not fair on those companies who have met their responsibilities as well as on those employees who have consequently lost out on workplace pension contributions because of their employer’s failure to comply with the law.

Leyton Legal