The number of small businesses failing to enrol their staff in the new government pensions has increased 14-fold in just three months.
Encouraged to save for their retirement, approximately six million workers have enrolled into the new schemes.
However, small businesses with more than five members of staff who fail to comply with the new requirements could land themselves with a hefty fine of £500 per day. This figure is less for small businesses with fewer than five employees at £50 per day.
At the end of 2012 it became a legal requirement for larger businesses to provide their employees with staff pensions and in 2015 small businesses were also included in this remit.
Between October and December 2015 the Pensions Regulator issued warning letters to 2,596 employers who failed to meet the requirement (average of 28 businesses per day).
When the policy was first introduced in 2012, the number of businesses fined for noncompliance was significantly less (average of 2 businesses per day)
These numbers solidify the worries that small business will not be able to cope with the changes, due to their lack of resources to cope with the administration of the new pension scheme.
Many small business owners claim that they will also struggle to find the money to contribute to the schemes, stating that the higher national living wage is already putting a strain on their finances.
They also spark new concerns about the mounting pressure on the 900,000 families across the UK who employ home help (such as a nanny, gardener, cleaner or a carer) as they are legally classified as an ‘employer’. In the next two years, they will also be required to provide a pension for their employees.
An official report by the National Audit Office (NAO) revealed that the government has previously drafted an ‘emergency pause’ to these new requirements allowing employers more time to solidify the pension scheme within their business after documents revealed the government were considering a delay in the scheme to boost saving.
Policy director for the Federation of Small Businesses (FSB), Mike Cherry, recently stated:
‘It is clear that many small firms will struggle to get to grips with the legislation and implement it correctly, while large numbers of small firms are concerned about the cost to their business
We advise smaller employers to plan ahead and ensure they are prepared for their staging date, and seek advice and guidance from trusted parties.’
Minister for Pensions Baroness Ros Altmann said ‘from now on, the smallest employers will start to meet their obligations and we must ensure they know what to do and have help if they need it.
Thanks to automatic enrolment workplace pensions are becoming the norm and we expect 9 million people to be newly saving or saving more.’
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