PENSIONS INSIGHT
Client compliance failure
● give staff the option to pay their own backdated contributions – staff can choose whether or not they wish to do this. n The Pensions Regulator explains what happens if a client doesn’t comply or is late complying
L ike all employers, clients need to comply with their duties under automatic enrolment – it’s the law. The Pensions Regulator (TPR), which recognises that most employers will want to do the right thing for their staff, will work with agents and their client if help is needed to get them compliant. However, if a client ignores their duties they may face enforcement action. TPR’s approach is to educate, enable and enforce where necessary. TPR communicate with all employers to make them aware of their duties and to help them understand what they need to do to comply with the law. It’s important that if you have clients they realise that responsibility for being compliant rests with them. In cases where a client hasn’t understood their duties or have been unable to comply, TPR will work with them to get them compliant. However, if they have chosen to ignore their duties, TPR may use enforcement powers to ensure compliance. If a client is late complying or thinks they might be, they should tell TPR about it straight away. It’s important that employers take reasonable steps to put all workers back in the position they would have been in if they had complied on time – the employer should not profit from their mistake. For example, if a client fails to enrol a worker from their staging date, they should: ● enrol them in a pension scheme, and treat the staging date as the automatic enrolment date ● ensure members of staff are in the position they would have been in had the employer complied on time, and
The Pensions Regulator’s enforcement options
Guidance and instruction can be issued by telephone, email, letter and in person. Warning letters may also be sent confirming a set time frame for compliance with the duties. Statutory notices are sent in the post, and can direct employers to comply with their duties and/or pay any contributions they have missed or are late in paying. If unpaid employer contributions are not paid within three months of the notice being issued, the client can be required to pay any outstanding staff contributions too. Penalty notices are sent in the post, and can be used to address persistent and deliberate non-compliance. A fixed penalty notice may be issued if a client doesn’t comply with statutory notices. This is fixed at £400 and payable within a specific period. An escalating penalty notice can be issued for failure to comply with a statutory notice. This penalty has a prescribed rate of £50 to £10,000 per day depending on the number of staff the client has. A civil penalty can be issued for cases where a client fails to pay contributions that are due. This is a financial penalty of up to £5,000 for individuals and up to £50,000 for organisations. The Pensions Regulator aims to fully recover all the penalties issued (using court action if necessary). Penalty notices can be paid using TPR’s secure online payment service. Employers should have their penalty notice reference handy (shown on the front of the notice). Failure to pay the penalty can result in TPR bringing formal legal proceedings to recover the penalty.
Informal action
Statutory notice
Penalty notices
Key points ● The responsibility for complying with the employer duties rests with the client. ● If a client doesn’t comply, they may face enforcement action. ● Enforcement action usually starts with statutory notices and is followed by penalty notices. ● If a client complies late, they will need to pay back any missed contributions to put staff in the position they would have been in if they had complied on time. ● Deliberately failing to enrol eligible staff and knowingly including false information in a declaration of compliance are criminal offences and may result in prosecution.
Useful links ● Compliance and enforcement bulletins: http://bit.ly/2kdbXkQ ● Online payment service: http://bit.ly/2leZY6x ● Popular questions: http://bit.ly/2kJM6Er
| Professional in Payroll, Pensions and Reward | March 2017 | Issue 28 32
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