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Education Pensions Speedbrief: Pensions Regulator publishes details of first enforcement action for auto-enrolment non-compliance

    • Education - Briefings

    08-05-2014

    The Pensions Regulator has published its first section 89 report relating to breaches of the automatic enrolment legislation. The report details enforcement action taken against Dunelm Soft Furnishings Ltd (“Dunelm”) after Dunelm failed to enrol some members of its staff on time and committed other breaches of the legislation. The Regulator inspected Dunelm’s head office, met with their senior teams, and ultimately ordered the company to pay around £100,000 in unpaid pension contributions. 

    This reinforces the need for employers – small and large alike – to take automatic enrolment seriously. For those who are yet to stage, the Regulator has put down a marker that it expects proper and full compliance; those employers who have already staged should consider some kind of after the event audit of their arrangements in the light of experience over the past 18 months.

    Our online auto-enrolment compliance tool, aeready, can help in both cases.

    Background

    Dunelm’s automatic enrolment staging date was 1 April 2013 and they were due to register with the Pensions Regulator to confirm that they had complied with their auto-enrolment duties, by 31 July 2013. However, Dunelm did not register in time and despite being contacted by the Regulator and being given a number of opportunities to complete registration or notify the Regulator of any outstanding issues, Dunelm did not do so. Consequently, the Regulator issued a Compliance Notice on Dunelm directing it to complete registration.

    Registration was subsequently completed by Dunelm on 15th August 2013. However, shortly after this the Regulator received further information which led it to believe that Dunelm may not have fully complied with its auto-enrolment duties. As a result, the Regulator undertook an inspection of Dunelm’s head office and met with Dunelm’s payroll and HR teams and their advisers.

    From this it became apparent that Dunelm had:

    • failed to enrol members of its four weekly payroll on time (these members were automatically enrolled a month late)

    • failed to enrol certain members of its monthly payroll on time (these members were automatically enrolled three months late), and

    • failed to pay across to the pension provider a significant amount of contributions as a result of the failures above.

    It was evident to the Regulator that these issues existed and were known prior to registration. This meant that the data submitted in the Regulator’s registration portal was inaccurate and the declaration indicating compliance with employer duties was wrong. It was also clear that key personnel at an executive level had been unaware of the service of the Compliance Notice directing registration, and the internal governance for ensuring the proper completion of this process had failed.

    Dunelm engaged with the Regulator and openly explained the difficulties they had experienced and the cause of a number of the issues. The contributory factors were:

    • Dunelm’s bespoke payroll solution had design flaws resulting in significant delay in achieving compliance and completing registration. The bespoke payroll solution did not fulfil the Dunelm specification, was ineffective for automatic enrolment and the reporting capability was not fully functional

    • key members of staff involved in the automatic enrolment project, including the points of contact, had ceased employment with Dunelm at critical points in the automatic enrolment timeline, namely just prior to the staging date and just after registration, and
     
    • data quality issues were experienced when uploading employee information to the pension provider which prevented active membership of the pension scheme being achieved.

    The Regulator worked with Dunelm and its advisers to resolve these issues and, due to the significant amount of contributions that had not been paid as a result of the failure to auto-enrol staff on time, the Regulator issued an unpaid contributions notice in respect of around £100,000 worth of outstanding contributions.

    Dunelm has since paid all of the outstanding contributions into the scheme and it is now fully compliant with its duties.

    Comment

    Dunelm’s difficulties in complying with the auto-enrolment legislation on time highlight the importance of employers:

    • allowing sufficient time to prepare (we recommend at least 6 months)
     
    • being clear on who within their organisation is responsible for compliance

    • leaving sufficient time to test the readiness of their payroll software before their staging date, and

    • finding out their pension provider’s data requirements at an early stage.

    The report also gives some insight into how the Regulator is enforcing the auto-enrolment requirements. It shows that the Regulator is taking compliance seriously, but that it is prepared to engage with businesses and their advisers to help them resolve issues that they have encountered.

    The report specifically states that Dunelm were “open, forthcoming and fully cooperative with the regulator in their endeavour to meet their employer duties” . This perhaps explains why the Regulator makes no mention of issuing a fine in this case and it suggests that the Regulator will save the statutory penalties for employers that deliberately breach their duties and those who are unwilling to put things right when breaches come to light.

    How we can help

    We have developed an online auto-enrolment compliance tool, aeready, to help employers comply with their auto-enrolment legal duties.

    Click here to access the tool.

    Our tool is designed to give employers access to cost effective, expert legal support as they prepare to comply with their auto-enrolment duties. It can also assist employer’s conducting an audit of their auto-enrolment processes after their staging date.

    The tool makes use of the experience that we have gained advising around 100 employers on the auto-enrolment requirements.

    For more information contact

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