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Small businesses: beware of the auto-enrolment penalties

With new data revealing a surge in the number of auto-enrolment penalties being handed out to employers, small businesses should ensure they are fully aware of their responsibilities.

A recent report from the Pensions Regulator has revealed that enforcement action against businesses that failed to meet their auto-enrolment requirements rose by 306% in the year to March 2016. The figures have led to renewed concerns that some smaller employers are still not sufficiently prepared for auto-enrolment.

Deadlines for pensions auto-enrolment have been coming into force gradually since 2012, starting with the largest businesses. Enrolment for small businesses (with five to 49 employees) and ‘micro-enterprises’ (one to four employees) is still ongoing, and these groups will have a staging date between 2015 and 2018. Of the businesses still to implement auto-enrolment, the Regulator claims that 57% are micro businesses, with some 34% of these employing just one worker.

As part of their legal duties, employers are required to complete a Declaration of Compliance, even if they do not have any workers that are eligible for auto-enrolment. Those that fail to do so may be charged a £400 Fixed Penalty Notice. The Pensions Regulator also has the power to issue escalating penalty notices for businesses that breach the auto-enrolment regulations. These can start at £50 per day for micro businesses and £500 for small businesses, meaning that thousands of employers could face significant financial penalties for failing to comply.

Avoiding the pitfalls – some do’s and don’ts

Consider the following tips to help you stay compliant and avoid a potential penalty.


  • Assess the workforce – identify those eligible for automatic enrolment as well as other types of workers to whom you may have an employer duty
  • Communicate with your workforce – employers should provide written confirmation to eligible workers that have been enrolled, along with details of how individuals can opt out
  • Automatically enrol eligible workers – this should be carried out within the six week ‘joining window’. You should also enrol non-eligible workers who choose to opt in, and don’t forget to remove those who choose to opt out
  • Complete the Declaration of Compliance – this should be submitted to the Pensions Regulator within five months of your staging date
  • Keep records of the enrolment process – employers must keep specific records about their workers and their pension scheme(s)
  • Make employer contributions – from 6 April 2019 all businesses will need to contribute at least 3% on the qualifying pensionable earnings for eligible jobholders.


  • Ignore your employer responsibilities – there are significant financial penalties for non-compliance and, in some cases, the Regulator may seek criminal prosecution
  • Encourage workers to opt out – this will be considered a breach of an employer’s duty
  • Allow auto-enrolment to affect the recruitment process – do not suggest that an individual’s decision will affect their chances of being hired
  • Forget to monitor your employees – be sure to keep track of employees’ ages and earnings, which may change their eligibility status.

The responsibility lies with the employer to ensure they get matters right. More information and advice can be found on the Pensions Regulator’s website at