Auto-enrolment: The risk of non-compliance

Failure to comply with auto enrolment regulation can be met with enforcement action. Enforcement starts with statutory notices demanding compliance, these can be followed by fixed fines of £400 or an escalating penalty notice that has a prescribed daily rate of £50 to £10,000 depending on the number of staff. Further non-compliance can result in court action.

Recent research conducted by Barclays Corporate and Employer Solutions shows that, while SME decision-makers collectively show a responsible approach to auto enrolment, there is a minority of businesses that may be overly complacent about meeting the requirements. Almost three in ten SMEs that have not yet staged still do not know when their staging date is, and almost a quarter do not know anything about the auto enrolment staging process. There is a risk, therefore, that smaller SMEs with fewer resources enrolling next year – if adopting a ‘last minute’ approach – may leave preparation too late and pay the price with fines they can ill afford.

With 45,000 small businesses still to stage in the next year our research suggests that almost one in 10 SMEs are struggling to find the appropriate support, advice and information that they need. This is why we offer a broad range of modular solutions and services enabling small businesses to select the preferred expert support in the right areas, helping them to manage the process effectively and get quickly back to the day job.

Below is our nine step path to help small businesses when navigating auto enrolment:

1. Know your staging date
The date by which you must comply with auto enrolment regulations is based on your employee headcount as at 1 April 2012. You can confirm your staging date by entering your PAYE reference code at

2. Assess your workforce
To assess which employees are eligible for auto enrolment you can access assessment tools through your payroll provider or pension scheme.

3. Review existing pension schemes and select your supplier
You should check if any existing pension scheme you have in place qualifies as a workplace pension scheme under the new regulations.

4. Default investment selection
All pension schemes for auto enrolment need to have a default investment solution. It is important to provide your employees with a suitable and tailored default option.

5. Data migration testing
This ensures you take the time to understand the requirements of your payroll system, your pension provider and your in-house solutions. It is critical that the providers for each part of your auto enrolment solution integrate and work well together.

6. Communication
Auto enrolment presents a great opportunity for you to think about how and what you want to communicate to your employees, not just in relation to statutory pension requirements but about employee benefits in general.

7. Auto enrol eligible job holders
Once they have all been informed, the next step is to enrol all your eligible employees into the pension scheme and notify them of what is going to happen.

8. Register with The Pensions Regulator and keep records
You must register your auto enrolment solution at It’s also required that you to keep records for all the payments you have put into your pension scheme for up to six years, as well as for all employees that have joined or opted out of your scheme.

9. Contribute to your workers’ pensions
The level of contributions required will be phased in over time, from an initial minimum of 1 per cent of qualifying earnings from both employer and employee, rising to 3 per cent employer and 5 per cent employee contribution (including tax relief) from October 2018.

Employees may decide to opt out of your qualifying workplace arrangement – if so, you will need to have processes in place that deal with a refund of contributions in a timely fashion.