Auto-enrolment: First-class lessons from the first tier tribunal

Auto-enrolment compliance is a headache for many employers, with seemingly small failures leading to penalties from The Pensions Regulator (TPR).

So far this year, we have seen a landslide of decisions from the first-tier tribunal on this topic, with employers seeking to appeal against penalty notices issued to them by TPR. Digging through the rubble, there are a number of themes emerging and some hidden gems of lessons for employers to learn.

Declarations of compliance

Condor Estates Ltd v TPR, Skewer House Taunton Ltd v TPR and Total Industrial Machines Ltd v TPR

In February 2022, three cases were brought by three different employers that all made the same mistake: they had all failed to submit a declaration of compliance.

Within five months of an employer’s staging date, and every three years after that, employers must submit an online declaration of compliance to TPR. This declaration confirms to TPR that the employer has complied with its auto-enrolment duties. A failure to submit a declaration of compliance is, in itself, a non-compliance which could lead to TPR issuing a fixed or escalating penalty notice. In all three cases, fixed penalty notices were issued.

All three employers also raised the same ‘reasonable excuse’ for non-compliance: they had not received any correspondence from TPR, nor had they received any notices to comply with their duties. The compliance notices had been served during the pandemic (and between successive lockdowns), which was put forward as a potential reason why the notices had not been received. TPR’s position was that it had relied on a statutory presumption which states that any correspondence sent from TPR to an employer’s registered office is presumed to have been received by the employer. This presumption can be rebutted, but the burden is on the employer to provide evidence that it had not received the correspondence. The tribunal held that the employers had not provided a reasonable excuse for their failure to comply as they had remained in operation and trading throughout the pandemic. In addition, the employers had all failed to provide any compelling evidence to support their argument and had therefore failed to rebut the statutory presumption that TPR’s correspondence had been received.

Unpaid contribution notices

Davey West Ltd v TPR

In another case from February 2022, TPR issued an unpaid contribution notice which required the employer to pay unpaid contributions to the pension fund. When the employer failed to do so, TPR issued an escalating penalty notice, which would increase for each day that it remained unpaid. The employer appealed on two grounds: firstly, it argued that it had not received either penalty notice as its offices were shut; and secondly, it argued that it had experienced difficulties in contacting the pension scheme to pay its unpaid contributions. The tribunal found that neither were reasonable excuses, so the penalty notices were upheld.

Kingswear Halley Ltd v TPR

Here, the employer had been issued an unpaid contributions notice, which required it to provide evidence of compliance by 23 June 2021. The employer provided no such evidence, arguing that there were no unpaid contributions and, as of 30 June 2021, it had overpaid its contributions. However, TPR argued that, after querying the matter with the pension scheme, the employer’s unpaid contributions were still outstanding. The tribunal held that the employer had been validly issued an unpaid contribution notice and subsequently failed to comply with the deadline to provide evidence of compliance.

Morecambe Bay Wines Ltd v TPR

The employer failed to comply with an unpaid contribution notice for the period December 2020 to April 2021 and was subsequently issued with fixed and escalating penalty notices. The employer argued that all of its staff had been furloughed during the period of unpaid contributions, so it could not pay pension contributions. The first-tier tribunal held that the employer was still under a duty to make pension contributions as it was receiving a grant under the Coronavirus Job Retention Scheme (CJRS) and the employer should not have been using the CJRS if it could not afford to make pension contributions.

Application

In all six of the above cases, a consistent theme is that some employers may not be receiving correspondence from TPR. Admittedly, it can be tricky to prove that one has not received something. Therefore, the first and best defence against enforcement action by TPR is to ensure processes are in place to comply with auto-enrolment duties. This could include carrying out regular audits to ensure contributions have been paid to the pension fund and diarising recurring events, such as re-enrolment dates and the deadlines for declaring compliance (both of which occur every three years).

If things do go wrong, our top tips for employers are:

• Comply with any compliance notice as soon as possible after receipt to reduce the risk of receiving a penalty notice.
• If you do receive a penalty notice, ensure that the issue of non-compliance is dealt with swiftly and, if you intend to challenge the penalty, do so within the strict deadlines.
• Ensure that the contact details registered with TPR are up-to-date – this will help to prevent notices from TPR becoming lost.
• Ensure that robust systems are in place for collecting and distributing post – this will help to rebut the presumption that correspondence from TPR has been received.
• Engage with TPR at the earliest opportunity; TPR has the power to revoke a penalty notice without the need for a referral to the first tier tribunal, but only if the appeal to TPR is made within 28 days of the date of the notice. You then have a further 28 days to refer the matter to the tribunal once a decision has been made about the initial appeal to TPR.
• If a referral to the first-tier tribunal is made, be prepared to explain why a duty was not carried out.

For more information

For advice on appealing against penalty notices issued by TPR, or for general auto-enrolment queries, please contact Billy Richards, Alice Kinder or Doug Mullen.

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