Is Your Business at Risk? Understanding auto-enrolment compliance challenges 

More than a decade on from when auto-enrolment was first introduced, many employers are falling foul of the rules – often without even realising it. Despite the best intentions, regulatory changes and shifting business models can mean that a previously well-structured pension system is no longer up to scratch. As Mercer’s latest research reveals, only 13% of UK employers are highly confident they would pass a regulatory check by The Pensions Regulator (TPR). These checks can come with little notice, require a serious amount of data, and carry heavy penalties. TPR has issued over 450,000 compliance notices since spot checks began, and escalating penalty notices can cost businesses up to £10,000 per day. 

Under auto-enrolment laws, every UK employer regardless of size must assess its workforce, automatically enrol eligible employees, pay at least the minimum contribution to their pensions, and re-enrol anyone who opted out every three years. Despite these strict and complex requirements, many organisations still rely on internal teams or generalist providers for compliance.

Over half (51%) of employers manage auto-enrolment assessments internally and 29% use their payroll provider. Few businesses (just 3%) use a specialist auto-enrolment system to ensure their pensions stay compliant.

So, what are the common missteps businesses make, and how can they be rectified? 

When auto-enrolment was first introduced in 2012, many employers invested a lot of time and effort into setting up strong systems. However, over the past decade, many of these processes have frayed, sometimes without anyone noticing.

There are several reasons why a once-compliant system may now fall short: 

Mercer’s research found that more than half (55%) of businesses last reviewed their auto-enrolment processes before 2019, meaning they’re relying on severely outdated assessments to prove their processes are compliant. TPR’s fines are not reserved for those that knowingly flout the rules; simple administrative errors and overlooked changes can also incur penalties. 

Common non-compliance mistakes include: 

• Failing to re-enrol staff who previously opted out
• Not sending the required communications to staff when due
• Incorrect calculation of contributions 
• Faliure to keep proper records of audits

Each of these errors, even if unintentional, can mean a business is breaking the law. 

Given the complexity of regulation and high risks involved – not just financial penalties but reputational risks, too – relying on personnel who aren’t specialists in auto-enrolment can be dicey.

A specialist auto-enrolment advisor brings the necessary focus and expertise to navigate the requirements and audit your processes automatically, requiring minimal input from the business.

Specialist advisors are up to date with the legislative changes and industry best practices concerning pensions, and maintain rigorous documentation and data to ensure your scheme is always ready for a TPR check. 

They can help with: 

• Conducting end-to-end audits of auto-enrolment processes
• Identifying gaps and errors before they become costly problems
• Implementing corrections and safeguarding against future non-compliance
• Ensuring all communications, record-keeping and re-enrolments are done correctly 

Auto-enrolment was designed to be simple for employees, but for their employers, staying compliant can be anything but. As the years tick by, even the best laid plans can go awry.

A specialist auto-enrolment advisor can help keep employers safe. 

Auto-enrolment is one of a number to areas that employers and trustees need to keep on top of.  Mercer has conducted detailed research into this and other areas that can help you to save money, mitigate risk and increase value.

You can receive a free copy of how your DC pension and broader benefits compare against this research and against other UK employers.  We call this review a DC MOT.

The results will help you understand how you stand compared to your peers, as well as whether your business can save money, increase value and reduce risk in your benefits offering.