One of the questions I get asked quite a lot is…

‘As a business owner and employer can I choose not to comply with this new company pension legislation?’

There’s an easy answer to this…

You can but you really shouldn’t.

The responsibility for complying with automatic enrolment legislation is clear.

The responsibility for complying with automatic enrolment sits firmly with the employer.

If employers don’t comply with the regulation there are significant penalties for not doing what you need to. The first step the regulator will take is you don’t comply is they’ll issue a fixed penalty notice. This charge is £400 and is a one off however it’s only the start of the fines which are levied for not complying with the rules.

Next comes the daily penalties which range for smaller businesses range from £50 for business who employ p to 4 individuals which ratchets up to £500 per day for business who employ between 4 and 50 employees. Also when talking about the ‘days’ the per day fine is charged it includes Saturdays, Sundays, Bank Holidays and Christmas day (as well as your birthday!)

In addition to this, if you don’t pay the contributions into your pension scheme in an appropriate manner there are additional penalties and these fines can be up to £5,000 for individuals and up to £50,000 for organisations.

Also (yep, I’ve not finished yet!) there are the penalties for when you breach certain elements of the regulation, like for example encouraging the employees within your business to opt out of the pension scheme, there are additional fines which range from £1,000 all the way to £5,000.

To chase these fines the pension regulator has a number of powers. Firstly the regulator can take civil action. In addition to this they can prosecute employers who ‘deliberately and willfully fail to comply’ and have if you’re prosecuted for non compliance the right to confiscate goods and restrain assets during a criminal investigation.

Therefore the message is clear. You can choose not to comply. But the size, frequency and severity of the penalties for non compliance mean one thing…

It’s way way cheaper to comply with automatic enrolment legislation than it is to choose not to.

In addition to the financial penalties there are a few other areas you need to consider if you’re an employer not intending to comply.

Firstly, when automatic enrolment is fully implemented all employers in the UK will have a workplace pension scheme in place and will be making contributions on behalf of their employees.

One of the big ideas behind automatic enrolment is that workplace pension savings will eventually be a common standard across all employers.

If you choose not to comply, in addition to significant fines, it might be tough to compete for the most appropriate individuals to join your businesses team as well as retain your existing employees.

Also, it’s worth considering the potential impact on your businesses reputation. If you run a business you understand that reputation has significant impact on the success of your business. Now your clients might not care whether they comply with these new rules. Alternatively they might assume that not complying with the rules is indicative of a business which ignores important issues.

So the significant fines, the escalation of these fines daily, the potential reputation risk on your business, the impact non compliance could have on retention and recruitment and the fact that non compliance can result in both civil action and prosecution all points on one direction…

Whilst complying with automatic enrolment takes significant effort, a decent amount of time and a change in a few of your business processes. Not complying with automatic enrolment could be far far worse.