What is auto enrolment, and why should construction companies care?
Auto enrolment is designed to ensure that workers are registered on a staff pension plan. The legislation aims to provide vital financial safeguards for every qualifying employee’s retirement.
Well intentioned as it is, this is often difficult to implement – particularly for construction firms, which often employ a mix of direct staff and contractors that is likely to fluctuate according to the number and size of projects that the company is working on at any time.
Auto-enrolment obligations kick in from next April for many companies – so these firms have little time to get their houses in order.
When do firms implement auto enrolment?
An employer’s “staging date” is based on data about the company’s PAYE system held by HMRC at 1 April 2012. The timeframe in which a company has to implement auto enrolment depends on the size of its workforce and whether or not it uses the PAYE system.
If the business does not use PAYE, the staging date is 1 April 2017; if it does and has fewer than 30 employees, the exact date will depend on its PAYE reference number. With 30+ employees, the staging date depends on the first year that PAYE tax was payable.
For the 2012/2013 tax year, this is 1 May 2017; for the 2013/2014 tax year, this is 1 July 2017; for 2014/2015, it’s 1 August 2017; and for 2015/2016 it will be 1 October 2017. The official Pensions Regulator website can calculate the precise date.
What problems can implementation cause?
Auto enrolment requires that every employee has their circumstances – age, salary, tenure – assessed. This can be quite labour-intensive. If a company hires a large number of temporary employees for specific projects, this problem can increase in magnitude – unless an agency is used, in which case it will technically act as the “employer”. But the company will still need to implement an auto-enrolment scheme for any staff employed directly.
What are the penalties or fines for non-compliance?
If a company fails to implement auto enrolment, it will be charged a fixed one-off fine of £400, regardless of total staff or company size. Persistent non-compliance may result in additional daily fines, which will vary based on the size of the company.
If a firm directly employs 5-49 people, it can pay £500 for every day where all employees are not fully enrolled. For a company that employs 50-249, this increases to £2,500. If it employs 250-499, it doubles to £5,000. And if the total staff exceed 500, the fine doubles again to £10,000. After six months of non-compliance, a company may face criminal prosecution.
By Bill Monty, an independent financial adviser, specialising in auto enrolment, with Sable
