Compliance and enforcement

Transcription

1 Automatic enrolment Compliance and enforcement Pegasus Payroll Year End Neil Wilson Industry liaison team March 2017 The information we provide is for guidance only and should not be taken as a definitive interpretation of the law.

2 Why is automatic enrolment being introduced? There are currently four people of working age for every pensioner by 2050 there will be just two. 7 million people are under-saving Past and predicted trends in the life expectancy period of 65 year old men and women in the UK as of 2004 and 2010 DM v7a These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.

3 What s happened so far Employers declaring since Jan 2015 As at the end of January ,462 employers have completed their declaration of compliance, covering 24m workers, of which: 9.9m (41%) were already in a qualifying scheme; 7.3m people (30%) were automatically enrolled; 432k (2%) workers had the transitional period applied; and 6.5m (27%) were none of the above. 7,665 employers have completed a re-declaration of compliance 351,000 workers have been re-enrolled DM v9y These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.

4 Intelligence The intelligence channels that support our compliance work. Source: The Pensions Regulator Automatic enrolment: commentary and analysis 2016 DM v9y These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.

5 Use of powers Some of our powers used (to 31 December 2016): 211 information notices 57 statutory inspection notices 31,680 compliance notices 1,107 unpaid contribution notices 9,831 fixed penalty notices 1,477 escalating penalty notices 33,180 cases closed by 31 December 2016 DM v9y These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.

6 Tribunals An increasing number of people are appealing their fines at Tribunal, and yet just one person so far has been successful (164 requests to 31 December 2016) Employers who receive a statutory notice and disagree with our decision to issue it must first ask us for a review (5,351 to 31 December 2016) If they disagree with the outcome of that review they can then appeal the decision to the Tribunal Service. Employers have 28 days after the review decision is issued in which to appeal. The Tribunal will focus on whether the employer has a reasonable excuse for not complying with the compliance notice. Poor excuses include: the online system is too difficult to use no reminder was received the member of staff in charge of AE or the employer was ill a mistake was made

7 County Court Judgements Employers receive County Court orders to pay their automatic enrolment fines the order may be registered as a County Court Judgment - it would then affect their credit record and potentially their ability to get a mortgage, credit card or even a bank account in the future (it remains on the register for 6 years). Pubs, clubs and restaurants are at a higher risk of non-compliance with: a larger than average numbers of temporary workers a higher level of English as a second language, and many employees on non-standard contracts there s information on our website on how to assess and enrol people who work varying hours: and staff letter templates are now available in some other languages:

8 Quarterly forecast of employers due to comply with AE We estimate that up to 750,000 employers are due to start their AE duties in 2017 DM v7x These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.

9 Investigations Outcome of the 4,692 closed cases April 2015 to March 2016 Source: The Pensions Regulator Automatic enrolment: commentary and analysis 2016

10 Lessons learnt Sources: The Pensions Regulator Commentary and analysis 2016 Quarterly bulletins Monthly reports

11 What if an employer makes a mistake? TPR s approach is an employer: should take reasonable steps to put the worker back in the position they would have been in if the breach had not occurred, and should not profit from their mistake. So, if an employer fails to enrol a worker from their staging date they should: enrol them, backdated to the original date, and ensure backdated pension contributions are paid. require the employer to give the employee the option to pay their backdated contributions (over a reasonable timeframe). If the employer has not completed the actions and remedies required by our compliance notice within 3 months of the specified deadline, TPR has the power to: require the employer to pay both their own and employee contributions, and require interest to be added to outstanding contributions.

12 Case study i - small independent garage The employer failed to complete their declaration or respond to the compliance notice giving them 28 days to comply and was fined 400 They asked us to review the decision as they had delegated it to a junior member of staff and thought it had been completed. We responded this was not a reasonable excuse for failing to comply with their legal duties. The employer then appealed the decision to the Tribunal. The judge confirmed that we were right to issue the fine, the fact that a junior member of staff had failed to do this on the employer s behalf did not amount to a reasonable excuse.

13 Case study ii - County Court proceedings We began County Court proceedings against an employer in the licensed restaurant sector who had not paid their 400 fixed penalty fine They went on to complete their declaration of compliance, but did not pay the fine even after sending a number of reminders and giving them time to pay. So we made an application to the County Court to enforce the penalty they paid before the court made an order, but still had to pay court fees. We have the power to take an employer to court to recover the debt if they fail to pay the original fine.

14 Case study iii - Swindon Town Football Club fined 22,500 Swindon Town Football Company Ltd (STFC) was the first employer to be issued an Escalating Penalty Notice. The employer failed to complete their declaration of compliance and failed to put eligible staff into a scheme, pay contributions or write to staff explaining how automatic enrolment affected them. We gave guidance to STFC on how they could comply with their duties within certain timescales. A fixed penalty notice of 400 was issued and they continued to fail to comply and daily escalating fines of 2,500 were imposed totalling 22,500 They also had to pay 13, in outstanding pension contributions. Employers should not ignore their duties. TPR will work with you to help you comply, but we will use our powers where appropriate. Deliberate noncompliance will not be tolerated. If you have received a fine, you will still have to pay it even if you then go on to become compliant.

15 Compliance issues among employers - i Which workers should be considered? It is not just employees who come under automatic enrolment (AE). Even someone considered self-employed may not be excluded from the AE duties. If a personal contract of work or services exists and the individual is not providing the work as part of their own business, then they would be considered a worker. Fixed term, casual or non-permanent workers should be assessed under the same criteria as other workers. Zero hours contract workers are a category of worker employers will need to consider as part of their employer duties. Postponement gives employers flexibility (eg for short-term workers) but workers must be issued a postponement notice, within six weeks and a day from the start of postponement, or postponement cannot be used; and the staging date and declaration of compliance deadline remain unchanged.

16 Compliance issues among employers - ii Opting-in and out All eligible jobholders must be automatically enrolled before they can exercise their right to opt-out. Employers must take immediate steps to establish the worker s enrolment date, upon receipt of a valid Opt-in notice, as they may need to start taking deductions from the next pay day. Reassessing eligibility Employers must assess workers, who have not previously been eligible, at each pay reference period to see if the eligibility criteria is triggered. Those who have already been automatically enrolled once - or have been an active member of a pension scheme - and have then opted out or ceased membership, should be left until re-enrolment. Staff who earn less than 10,000 a year, will still need to be automatically enrolled if they earn over the threshold for their pay reference period - for example, over 192 for weekly or over 833 for monthly paid workers.

17 Summary Our approach: To educate and enable employers to help them comply. We want employers to contact us if they are experiencing difficulties. If an employer chooses to ignore their duties - this is unacceptable and statutory notices, 400 fixed penalty fines and escalating penalties can be issued for noncompliance, including: failing to complete a declaration of compliance. We recommend employers (or their advisors) should: not leave it to the last moment - thousands of employers may be in the queue! 6 months before staging, start planning to get a pension (if they have eligible workers) ensure software is fit for purpose (eg can send data to pension provider) cleanse employee data and test the payroll / AE software, preferably before staging.

18 Thank you We are here to help! Request a guest speaker: Contact us at: Subscribe to our news by For a full list of all our research and analysis: The information we provide is for guidance only and should not be taken as a definitive interpretation of the law.

19 Additional slides

20 Does your client have AE duties for any contractors? The (truly) self-employed are excluded from automatic enrolment (AE), but how is this determined? To check if your client has any automatic enrolment duties for a contractor who works for them and is not their employee, there is a 3 part test: A. If the contractor is not truly self-employed, would your client be considered the employer? B. Does the contractor have to do this work themselves (a personal contract)? C. Is the individual carrying out the work as part of their own business? DM v7x These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.

21 A) Is your client considered the employer? Your client is considered to be the employer, for people who: are employed by your client (ie your client holds the contracts of employment) or are directly contracted to perform work for your client and your client pays the individuals (unless they are truly self-employed). Note: If someone working for your client is employed by another company to do this work (perhaps they are employed by an agency or their own limited company), your client will not be considered the employer; or if someone working for your client is not an employee - and is paid* for this work by another business or agent (ie your client pays another person or organisation for this work), then they will be responsible for the automatic enrolment duties if any, not your client. *A payroll bureau that processes a payment on behalf of your client would NOT be considered the employer. DM v7x These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.

22 B) Does the contractor have to do the work themselves? Your client should not assume that a contractor working for them is exempt from automatic enrolment, even if they say they are self-employed Your client should consider if the contract (which could be written, verbal or implied), allows anyone to do this work. So, is the individual named in the contract and expected to do this work, unless they are unable to do the work themselves (eg they are on holiday or sick)? If the individual can freely subcontract or substitute somebody else, then your client will not have any automatic enrolment duties for the individual; or, if they have to do the work, this is considered a personal contract and the employer will then need to judge whether the individual is doing the work as part of their own business. DM v7x These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.

23 C) Is someone working as part of their own business? If someone (who is not a director) is not an employee and has a personal contract (ie are contracted to do the work themselves): The employer will need to consider whether the individual is working as part of their own business or not. There are a number of factors that will help decide this. Does the employer: have control of the hours they work? provide any employee benefits (eg sickness or holiday pay)? bear all the significant financial risks in carrying out the work (eg the worker is not financially responsible for their faulty work)? consider the individual to be part of their own organisation? provide what is required for the individual to carry out the work (eg tools)? If most or all of the above are true, it would be reasonable to consider that the individual is not undertaking the work as part of their own business and so are subject to automatic enrolment. Otherwise, they are truly self-employed and are exempt. DM v7x These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.

24 Postponement Postponement does not change or delay the staging date or declaration of compliance deadline Postponement delays the duty of automatic enrolment and the need to assess and can be used: at the employer s staging date for any or all existing staff on the first day of employment for any new joiner after the staging date, and on the date a member of staff meets the criteria to be an eligible jobholder. Only one postponement per member of staff can be made at a given time. Each worker can be postponed from one day up to maximum of three months. The employer must notify any postponed member of staff within six weeks and a day of the start of postponement. The member of staff has the right to opt in or join during postponement. Employer must assess on the last day of postponement and: automatically enrol eligible jobholders, and for those staff not eligible, monitor them each future pay period. DM v7x These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.

25 The Regulator s role Our statutory objective for automatic enrolment is to: maximise employer compliance with the AE employer duties Our approach is to: Educate, Enable and then Enforce and we are risk based and proportionate. We may start with informal action (eg instructions or preventative action) for minor breaches. We have statutory powers to gather information and can issue statutory notices and/or penalties (fixed penalty notices 400 or escalating penalty notices of up to 10,000 per day). Ultimately, we can use our powers to prosecute under criminal law (including the Proceeds of Crime Act 2002) and/or can carry out Civil debt recovery and we collaborate and share intelligence with other enforcement agencies.

26 Case study A - governance and testing Background: Through an investigation, we identified an employer who had: failed to enrol all eligible jobholders, and was not paying the correct contributions in some instances. How we supported compliance: we undertook an inspection (eg to check payroll records) we issued an unpaid contributions notice the rectification plan was agreed with the employer: all outstanding contributions were paid and eligible workers enrolled. The key reasons for non-compliance were: a key member of staff left the company at a critical time their bespoke payroll solution had design flaws, and data errors uploading employee information to the pension provider meant some people were not enrolled into the pension scheme.

27 Case study B - early testing of payroll software Background: A whistle-blower told us that their pension contributions were not being credited to their pension pot, according to the pension scheme provider. How we supported compliance: we contacted the employer to ensure they were aware of the failure, and on investigation, found the employer s payroll software was not sending information about the contributions to the provider in the right data format we agreed the plan of rectification between the employer, the payroll software provider and pension provider. The key lessons for employers are: early testing of payroll software is recommended, to allow sufficient time for any changes to be made and trialled ensure that software and exchange of data meets the needs of all parties.

28 Case study C - declaration of compliance Background: An employer, that was part of a corporate group, did not make their declaration of compliance on time The employer had aligned their staging date with other companies in the group, but did not allow sufficient time to gather the required information. How we supported compliance: we contacted the employer to require them to make their declaration. The key lesson for employers are: employers who are subsidiaries within a corporate group who wish to align their staging dates, need to ensure they complete their declarations on time accountability for doing this falls on each individual employer.

29 Case study D - setting up a pension Background: An employer had incorrectly assumed the payroll software they used had the functionality to interface directly with a pension provider without them needing to take any steps to choose and set up a pension scheme. The key lessons for employers are: Employers need to choose a pension scheme provider and then set up the pension scheme (eg with an appropriate default fund) There are a number of things an employer will need to find out and agree with the scheme provider, such as what information they need to make someone an active member of the scheme, and agreeing contribution rates and due dates for payment All of this should be done ahead of the staging date so that staff are ready to be automatically enrolled at the right time.

30 Preventing non-compliance - insolvent employers Insolvent employers that continue to employ staff still have AE duties. Over the next 3 years, many small high street insolvency practitioners with fewer resources are likely to handle small employer insolvencies. Insolvency practitioner s need to: understand the AE duties to help their clients, for further info go to make themselves the nominated point of contact to get our important communications tell us if an insolvent employer ceases to employ staff, so we can stop directly communicating with the employer.

31 Failure to comply by an employer escalating penalties Number of persons Prescribed (calendar) daily rate ( ) , , or more 10,000

32 Prohibited recruitment conduct (s50/s51) Number persons Fixed penalty ( ) 1-4 1, , , or more 5,000