United Kingdom

Businesses are continuing to fall foul of AE duties

September 2015


Despite increased communications and guidance around auto-enrolment from The Pensions Regulator (tPR) and industry specialists, many UK businesses are continuing to fall foul of their compliance duties either from incorrect assumptions about the legislation or misinformation.

In their June bulletin in particular, the Pensions Regulator (tPR) highlighted several examples of employers failing in their duties:

Zero-hour contracts
A residential care worker agency failed to auto enrol their staff due to an incorrect assumption that those on zero hour contracts ‘did not count’. Upon investigation, tPR found that as staff members were employed directly by the agency - including those on zero-hours contracts - and each staff member was individually responsible for the work they carried out in the nursing homes, the employer had auto-enrolment responsibilities for all those on their books.

tPR said: “The employer needed to assess them [the staff] for automatic enrolment based on their ages, and how much they earn, in the normal way. The employer was issued with a compliance notice and a £400 penalty before they contacted us to check their understanding of the legislation, as a result of which they are now compliant.”

Seasonal or casual workers
A catering business assumed that seasonal staff or casual workers were not eligible for auto enrolment, even though the legislation is clear that employers must assess auto-enrolment eligibility on account of age and earnings, regardless of the length of employment and whether the work is seasonal.

tPR said: “The employer was issued with a Compliance Notice and subsequently complied without the need for further enforcement action. However…they decided to use postponement to smooth the process of automatic enrolment in respect of their short-term workers, or workers who triggered automatic enrolment just before ceasing employment.”

Increase in unpaid contribution notices
The watchdog also reported an increase in unpaid contribution notices. Clare Abrahams, Head of Auto Enrolment at Aon Employee Benefits said that out of the 71 unpaid contribution notices issued to date, 50 (70 per cent) were issued during the last quarter since April, in comparison to just 9 in the previous quarter.

Compliance notices however, have actually reduced: 213 compliance notices were issued in the last period compared to 119 during this one.

“I suspect compliance notices in Q1 of this year would have been in respect of stagers around August – October 2014, whereas Q2 would have been for stagers in November 2014 to January 2015,” Abrahams explained. “I believe there were significantly bigger volumes of employers staging during the first period (c. 11,500 from initial forecasts for July to Sep 2014) – and actually very few in the latter period (c. 1,200 from initial forecasts for Oct to Dec 2014).”

Abrahams speculates that the next ‘peak’ in stagers is likely to be from 1st April through to 30th June 2015 which will start hitting compliance reports five months later. This data won’t be reported until the compliance enforcement period which covers September 2015 onwards.

“I would expect a number of compliance incidents to be naturally higher in this period, given the increase in affected employers,” she said.

Commenting about the reported rise in unpaid notices, Abrahams believes it is down to a ‘time lag’ relating to the 213 employers who were issued with compliance notices previously.

However, she warned there were ‘still too many misconceptions’ around worker definitions for the purposes of auto-enrolment which is likely to ‘hit smaller employers hard’, since contracts of employment may not be ‘completely clear cut’.

Abrahams added: “It is vital that employers start their planning and workforce analysis well in advance of their Staging Dates and seek help where they are unsure.

“The videos Aon recently produced with the Pensions Regulator address this specifically and aim to correct some common misconceptions that will impact on employers still to stage. They are available on our website and we would encourage employers to have a look and get clarity as early as possible.”



Aon UK Limited is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales. Registered number: 00210725. Registered Office: The Aon Centre, The Leadenhall Building, 122 Leadenhall Street, London EC3V 4AN.