The Pensions Regulator has recently published a report highlighting the problems faced by Dunelm Soft Furnishings Ltd in implementing automatic enrolment for its employees. While the report focuses on Dunelm’s specific circumstances, it contains useful lessons for employers, particularly those whose staging date is coming up in the next few months.
Case study: Dunelm Soft Furnishings Ltd
Once an employer’s staging date has arrived, it must complete registration with the Pensions Regulator confirming that it has complied with its auto-enrolment duties. When Dunelm did not complete registration by its deadline of 31 July 2013, the Regulator got in touch, encouraging Dunelm to either complete registration or notify the Regulator of any issues. Dunelm did not respond, so the Regulator issued a formal compliance notice.
The power to issue a compliance notice is one the Regulator’s key powers in connection with its objective of maximising employer compliance with the auto-enrolment regime. The notice will usually set out the steps that the employer needs to take, set deadlines for complying or providing further information, and state that failure to comply will lead to a fixed penalty being imposed.
Shortly after receiving the compliance notice, Dunelm completed its registration and confirmed that it had fulfilled its employer duties. However, it soon came to the Regulator’s attention that, in fact, Dunelm had not complied, and several breaches of the Pensions Act 2008 were identified.
The Regulator visited Dunelm’s head office for a statutory inspection, working together with Dunelm personnel, advisers and providers to gather information about the breaches that had occurred. It became clear that Dunelm had experienced a number of difficulties in implementing auto-enrolment. As a result, there had been a delay in enrolling employees into the pension scheme and significant pension contributions had not been paid.
These issues were ultimately resolved through close collaboration between the Regulator, Dunelm and their third-party payroll suppliers, and Dunelm is now fully compliant. In issuing its report, the Regulator’s primary aim is not to “name and shame” Dunelm, but to highlight potential pitfalls that could be relevant to other employers.
Lessons for employers
There are three key points that employers should take away from the report:
Preparation is key
The primary reason behind Dunelm’s failure to comply was that its bespoke payroll solution contained a number of design flaws. This was compounded by the fact that the quality of employee data held by Dunelm was poor, preventing members from being enrolled.
Both of these issues should have been dealt with well in advance of the staging date. Comprehensive testing of systems and processes should be carried out, particularly where bespoke systems are being used, and employee data should be verified and supplemented where necessary.
Focus on internal communication and oversight
Member communication is, of course, a vital piece of the auto-enrolment jigsaw. However, the importance of ensuring that key personnel within the employer organisation are also kept informed about the process should not be overlooked.
In Dunelm’s case, key personnel left the organisation at critical points in the process (including immediately prior to the staging date), without successors being fully informed and able to take over. The Regulator identifies in its report the vital importance of smooth handovers and consistency of personnel.
It’s also worth noting that Dunelm executives were unaware that the Regulator had served a compliance notice on the company. Again, this emphasises the importance of internal oversight and frank communication about any problems.
Act early and be open about potential issues
Dunelm did not raise any issues with the Regulator before their staging date and failed to respond to a number of requests for information about any potential problem. Despite the fact that they had clearly failed to comply with their employer duties, Dunelm submitted registration confirming that they had complied.
The Regulator’s report takes care to praise Dunelm staff several times for being open, forthcoming and co-operative as soon as the issues had been identified and the Regulator became involved. However, if Dunelm had contacted the Regulator sooner, matters could have been resolved more quickly and may not have escalated to the point where statutory notices were issued.
The Regulator’s three-pronged strategy in fulfilling its auto-enrolment objective is to educate, enable and enforce. The Dunelm report suggests that its preference is to exhaust the first two prongs, through working together with employers and providers to assist them in achieving compliance, before moving on to the third.
If your staging date is approaching and you would like advice on any of the points raised in this article, please get in touch with your usual pensions team contact.