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Legal Updates

Auto enrolment - don`t get a fine of up to £10,000 a day!

10 January 2014 #Employment

As has been well publicised, since 1 October 2012 every employer in the UK has been supplied with a staging date to automatically enroll eligible workers in a pension scheme and pay mandatory contributions. This is the biggest change to workplace pension provision in a generation.

There is a need to relieve the pressure on the Government’s finances caused by a workforce who are living longer but not saving enough for their retirement.  Therefore, we anticipate the Government will be rigorous in their enforcement of this and in fact there are companies engaged to actively to check up on companies.

What is your staging date?

  • If you don’t know check! 
  • If you want a free, no obligation initial impact report – let us know! 
  • All we need is the last 2 digits of the company PAYE reference and the number of employees in April 2012. 


Employers must currently register online within 4 months of their staging date but this will rise to 5 months from 1 April 2014. Re-registration will be required every 3 years.

  • Records must be kept for six years of auto-enrolments, opt-in and opt-out processes and contributions.
  • Contributions deducted from a worker’s salaries together with employer contributions must be paid into their schemes within a statutory time limit. Late payment must be reported to the Regulator.
  • Even prior to an employer’s staging date it cannot offer any form of inducement to a worker to opt out of the scheme or offer any advice.


  • The Regulator can issue a compliance notice or unpaid contribution notice for contributions overdue for at least 3 months. Interest can be added at a rate of 4.2% plus the increase in RPI. The Regulator can estimate the unpaid contribution or force an employer to calculate this.
  • If a worker complains to the Regulator within 6 months of being offered an unlawful inducement to opt out and the complaint is upheld a compliance notice can be issued. Following the complaint the Regulator can look back at the employer’s actions in the previous 4 years.
  • Making employment conditional on opting out will lead to a fixed penalty fine ranging from £1,000 for employers with one to four workers to £5,000 if 250 or more.
  • Failure to comply or co-operate with the Regulator can lead to enforcement action. In this first instance or a minor breach this may just be a warning letter. For more serious breaches further investigation can take place, forcing information to be supplied or inspection of premises.
  • An Improvement Notice can be issued requiring specific action within a certain time.
  • A Third Party Notice can be issued if a third party’s actions have led to the contravention.
  • If a breach is not remedied there are two levels of penalties – Fixed Penalty of £400 or Escalating Penalty Notice for more serious or persistent breaches which range from £50 per day if one to four workers to £10,000 a day for those with 500 or more workers.
  • Trustees can be suspended or removed and replacement’s appointed.
  • Imprisonment is also a sanction!

When deciding about what enforcement action to take the Regulator will consider aggravating factors such as if a large number of works are affected by this breach, systematic problems, an intentional breach of law, attempts to conceal non compliance and failure to co-operate with the investigation. 

Alternatively mitigating factors will be if there are a small number of workers affected and minimal impact, prompt action to make staff and the Regulator aware of the breach, proactive steps to resolve, co-operation with an investigation and a good track record of compliance. 

If the sanctions above are not enough, employers should also consider that “wilful” failure to comply with some key duties can be a criminal offence and if found guilty they could be liable for imprisonment, a fine or both.

Kenny Fyfe
Carillion Advice Services

Clarkslegal, specialist Employment lawyers in London, Reading and throughout the Thames Valley.
For further information about this or any other Employment matter please contact Clarkslegal's employment team by email at by telephone 020 7539 8000 (London office), 0118 958 5321 (Reading office) or by completing the form on this page.
This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full General Notices on our website.

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