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Pensions auto-enrolment: 25 recruitment firms breach rules

Data obtained by outsourced employment provider Parasol under the Freedom of Information Act reveals that, between 1st October 2012 and 30th April 2014, the Pensions Regulator recorded 25 breaches by recruitment agencies and staffing firms.

Warning letters were issued in 16 cases, while the remaining nine were dealt with through “informal action in order to educate and enable the employers to comply with their duties.”

No details were given regarding the nature of the breaches, but examples could include poor record keeping, a lack of communication and encouraging or coercing workers to opt out of a pension scheme.

Fines of up to &pound50,000 can be imposed for non-compliance.

The regulator revealed that 13 voluntary visits were made to recruitment firms between 1st October 2012 and 31st December 2013 in order to “share good practice” regarding auto-enrolment. No inspection powers were used.

Parasol managing director Derek Kelly said: “These figures should act as a stark reminder to the recruitment industry that it is being watched like a hawk over auto-enrolment.

“Although no fines have been imposed to date, it’s likely that the regulator’s patience may wear thin as time progresses – and that future breaches could result in financial penalties.” 

The date at which a company must begin enrolling workers in a scheme, known as its staging date, depends on the number of people included on its payroll in April 2012.

Responding to Parasol’s request for information, the regulator said 11,834 employers across all sectors had completed auto-enrolment registration by 30th April 2014.

An additional 26,915 are expected to do so between 1st May and 31st December 2014, giving an overall total of 38,749 employers.

The regulator was unable to specify exactly how many recruitment firms will reach their staging date during this period, but it has previously estimated that more than 1,000 would do so between April and July 2014.

It has also warned that the sector is likely to face “significant compliance challenges” because of issues around part-time, temporary and seasonal workers.

Kelly added, “Since our April 2013 staging date, contractors and freelancers who join Parasol have had access to a compliant workplace pension scheme as part of their employment package.

“Having implemented a robust solution ourselves, we have subsequently given several agencies strategic guidance and advice on auto-enrolment.

“From our conversations it’s clear that while the vast majority of staffing firms are doing all they can to comply with the legislation, they lack the time and technical expertise.

“That’s why we offer a range of contingent worker employment solutions that free staffing firms from the risks and costs associated with auto-enrolment.”

Parasol estimates that the typical recruitment firm employing temporary workers on a PAYE basis will face an initial setup cost of at least &pound25,000 as it battles to get to grips with auto-enrolment.

That figure includes three months of senior internal resource, legal advice, director input, time spent engaging with clients, plus payroll software upgrades.

Click here to download Parasol’s guide to auto-enrolment for recruitment firms.

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