If an employer tries to avoid auto-enrolment, they’ll catch them if they can

29th May 2013

A survey by the employer’s organisation the Institute of Directors has shown that a small number of smaller employers may be going to try and duck the regulations surrounding the new workplace pension regime. The message, from a few employers, is that they see auto-enrolment as a tax and a few are going to try and get away with not complying.

Catch us if you can, was one widely reported comment. But how realistic is this? Well first of all, we should accept that these are anonymous comments from one or two employers with fewer than 50 employees. Many smaller employers are feeling embattled, by banks, by the economy and, of course, they have a wary eye on anything that suggests more red tape.

The new reforms mean they could face a huge increase in costs. First of all, implementing the reform and its administration will be expensive. Second, and more significantly, it could see a big increase in the pension bill as auto-enrolment means a pension has to be offered to just about all the workforce except those on very low salaries. If employees join, the employer must pay in at least three per cent. We have already noted on Mindful Money, that this could see some employers seeking to manage the cost perhaps be cutting pension benefits to those who have joined pension schemes before this reform. But it may be tempting for employers to encourage employees not to join.

This is not allowed. An organisation called the Pension Regulator will have to police auto-enrolment to ensure that employers comply and although it is not talking very tough yet, hoping to encourage compliance and suggesting it will look sympathetically on honest mistakes, it will eventually have to show its teeth. That will mean fines at least.

If you are an employee reading this, auto-enrolment compliance will be the law. It is also illegal to put pressure on employees, i.e. you not to join or opt out in the terminology.

For employers reading this, the system may appear frustrating and you may believe that pensions are either an individual’s responsibility certainly when it comes to contributions, or even that of the Government. There is an argument to say that more of the administration for this system should have been handled centrally. This may be so the Government could try and argue this is not some sort of a tax. You may see it differently. It may be worth getting advice about the costs. But it’s not worth betting the business because they’ll catch you if they can.

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