Out-Law / Your Daily Need-To-Know

Out-Law Guide 1 min. read

Auto-enrolment safeguards and employer penalties


This guide was last updated in February 2013.

Between October 2012 and February 2018 employers will need to start automatically enrolling all of their 'eligible jobholders' in a pension scheme which meets minimum requirements. Employers will need to assess their workforce to determine who is an eligible jobholder. They must put processes in place to ensure workers are enrolled once they become eligible, and that those who have opted out are re-enrolled every three years.

Protecting workers

Employers must not encourage workers to opt out of a pension scheme used for these purposes. Employers must take care not to imply in any way that a worker might receive more favourable treatment if he opts out.  Employers should be particularly careful not to advise workers to opt out even if they believe it would be in their best interests to do so.  However, employers can tell workers with enhanced or fixed protection that this will be lost if they do not opt out.

An employer must not treat a worker unfairly or dismiss him because he does not want to opt out. Workers can enforce their rights in an employment tribunal.

The employer must automatically enrol a worker into another scheme within one month if it does something to take a worker out of a compliant scheme.

Relationship with flexible benefits

It is not entirely clear whether an employer can offer a flexible benefits package where a worker can choose to opt out of the pension scheme and choose another employee benefit or a higher salary instead. Employers wishing to offer this option should take legal advice.

Conditional offers

A job offer or renewal of a contract cannot be made conditional on whether a candidate agrees to opt out. Job adverts and application forms should not suggest this is the case.

Penalties

The Pensions Regulator can compel employers to comply with their auto-enrolment duties. The Regulator can impose a fixed penalty of £400 on employers who fail to comply.

In some cases, the Regulator can impose a daily penalty of between £50 and £10,000 depending on the number of employees affected.

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