What to do if you can’t pay company pension contributions, auto-enrolment pension contributions are a legal requirement for many employers in the UK, and they can be a significant cost for small businesses in particular.
You should try negotiating with your pension provider to see if there are any options for reducing your contributions or spreading them out over a longer period of time.
You may also be able to take advantage of government schemes such as the Employment Allowance, which can help offset the cost of auto-enrolment contributions for small businesses.
Another option is to review your overall business expenses and see if there are any areas where you can cut costs or increase efficiency.
This could involve negotiating better rates with suppliers, streamlining your operations, or finding ways to reduce waste. You may also want to consider ways to increase your revenue, such as by expanding your customer base or diversifying your products or services.
Ultimately, it may take a combination of these strategies to help you afford the cost of auto-enrolment contributions, but it is worth the effort to ensure that you are meeting your legal obligations and providing a secure retirement for your employees
What if we can’t pay company pensions for employees and employers contributions?
If you are unable to pay company pensions, it is important to address the issue as soon as possible to avoid any legal or financial consequences. The first step should be to communicate with your employees and explain the situation to them. It may be necessary to temporarily suspend or reduce pension contributions until the company’s financial situation improves.
It is also important to consider alternative options, such as negotiating with the pension provider to find a solution that works for both parties. If the issue is more severe and the company is at risk of bankruptcy, it may be necessary to seek the advice of a financial professional or legal counsel to determine the best course of action.
Regardless of the specific circumstances, it is important to approach the issue in a transparent and honest manner to maintain trust with your employees and to minimize any negative impact on the company’s reputation.
Your duty under auto enrolment
As an employer, you have a duty under auto enrolment to provide a workplace pension scheme for your employees and to automatically enroll eligible workers into the scheme. You must also make contributions to the pension scheme on behalf of your employees. The specific requirements for auto enrolment vary depending on the size and type of your business, as well as the age and earnings of your employees.
It is important to familiarise yourself with these requirements and to ensure that you are complying with the law. Failure to meet your auto enrolment obligations can result in financial penalties and other legal consequences.
It is also important to remember that auto enrolment is designed to help your employees save for their retirement, so it is in your best interests to support and encourage their participation in the pension scheme.
What are the consequences of not paying your company pensions?
Not paying your company pensions can have serious consequences for both your business and your employees. Firstly, it is a legal requirement for employers to provide a workplace pension scheme and to make contributions to the scheme on behalf of their employees.
Failing to do so can result in financial penalties and other legal consequences, such as fines and court action. Not paying your company pensions can also damage your reputation as an employer and may lead to a loss of trust and goodwill among your employees.
The Pensions Regulator has a number of enforcement options these include:
Statutory notices are a legally binding method for informing businesses of any overdue contributions, as well as specifying when these payments need to be received by. Statutory notices act as an imposed deadline for when payments are due, and include details on the interest which will be added in accordance to the business’s failure to make the necessary contributions. Statutory notices should be taken seriously and businesses must ensure that payment deadlines are met and all other stated requirements are fulfilled.
Penalty notices are an important tool for employers, as they provide an effective means of enforcing statutory compliance. Fixed penalty amounts are generally set at £400, although the daily amount of a penalty notice can range up to £10,000 per day depending on the size of the organisation. This can be a huge financial burden and is certainly not to be taken lightly. On top of this, there may also be a civil penalty of up to £50,000 if pension contributions remain unpaid. Making sure that all legislation is met without fail is key in order to avoid such stiff penalties.
Civil actions are just one of a number of regulatory tools used by the regulator to ensure that firms comply with the requirement – an example being cases recently heard where employers forced staff onto “high-risk” investments. Civil penalties are aimed at both protecting members and encouraging compliance, while deterring non-compliance in order to maintain high standards in workplace pension provision.
In addition, not paying your company pensions can have negative financial consequences for your employees, as it may reduce the amount of money they have available for their retirement. It is therefore important to ensure that you are meeting your obligations and paying your company pensions on time and in full.
How to proceed when you can’t pay your company pensions
Failing to make employer pension contributions is a serious matter that can have serious consequences for both your business and your employees and the pension regulator will keep up with the pressure whilst plans are put in place. If you are unable to make these contributions, it is important to seek professional insolvency help as soon as possible to determine whether your business has entered insolvency. Insolvency refers to the inability of a business to pay its debts as they become due.
If your business is insolvent, it may be necessary to take steps such as restructuring your debts or selling off assets in order to pay creditors and avoid bankruptcy. Insolvency can have significant legal and financial consequences, so it is important to seek the advice of a professional who can help you navigate the process and protect your interests if you can’t pay company pensions contributions.
Conclusion
When a company faces financial difficulties and is unable to meet its pension obligations, it can create a challenging situation for both employers and employees. If you can’t pay company pensions it can be a distressing issue, as employees who have diligently contributed to their pension plans may worry about the security of their retirement savings.
Employers may need to take prompt and appropriate action, such as seeking financial advice, exploring restructuring options, or negotiating with employees and pension trustees to find a viable solution. Communication and transparency are crucial in such situations to manage expectations and provide updates to employees.
As an employer you must also comply with relevant laws and regulations governing pension schemes in the UK and work towards resolving the issue in the best interests of their employees while fulfilling their legal obligations.
With over three decades of experience in the business and turnaround sector, Steve Jones is one of the founders of Business Insolvency Helpline. With specialist knowledge of Insolvency, Liquidations, Administration, Pre-packs, CVA, MVL, Restructuring Advice and Company investment.