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Auto-Enrolment Penalties Stay With The Employer, Not The Accountant

ended 27. July 2026

Auto-enrolment is one of the duties an employer cannot hand to anyone else. Staff pension contributions have to reach the scheme on time, and if they do not, it is the employer that pays, whoever runs the payroll. The catch is what that costs. Regulation 12 of the Employers' Duties (Registration and Compliance) Regulations 2010 sets a flat fixed penalty of £400 however big or small the business, so the £400 is the entry fee rather than the bill. The money is in what comes next.

Regulation 13 sets an escalating penalty that runs at a daily rate. Where an employer has failed to comply with an unpaid contributions notice, that rate is set by the number of workers the Regulator considers had contributions unpaid by the due date: £50 a day for 1 to 4, £500 a day for 5 to 49, £2,500 for 50 to 249, £5,000 for 250 to 499 and £10,000 for 500 or more. Where the Regulator does not know that number it falls back to the headcount in the employer's PAYE scheme, and where that is not known either the rate is treated as £50. So the same failure costs an employer that missed contributions for 4 workers £50 a day and one that missed them for 5 workers £500 a day, a tenfold step at a threshold most employers never notice they have crossed.

A First-tier Tribunal (General Regulatory Chamber) decision given on 24 July 2026, D&G Property and Investment Ltd v The Pensions Regulator, shows how it starts and how it ends. The employer's account was that its pension provider had “unilaterally cancelled” the direct debit “without notice”. The tribunal made no finding on why the payments stopped and accepted that a reasonable excuse may have existed for a time. What sank the case was what came after: a signed direct debit mandate is not proof of payment, and “late compliance does not excuse previous non-compliance”. The reference was dismissed and the £400 confirmed. The Regulator's own guidance says contributions must be paid before evidence is sent, and that it cannot accept documents showing payments scheduled for a future date. The person really caught here is the owner of a firm with a handful of staff who set up a direct debit years ago and has nobody whose job it is to notice the month the money stops going out.

  1. The tribunal held that sending the Regulator a signed direct debit mandate was not evidence the contributions had been paid, and that complying late does not excuse the earlier failure. Is that the right line to draw, or is it harsh on a small employer who paid someone else to run the payroll?
  2. The daily escalating rate jumps from £50 to £500 the moment a fifth worker's contributions are among those unpaid. Is a tenfold step at that point proportionate, and who does it hit hardest?
  3. What should a small employer actually have in place so a lapsed pension direct debit is caught in days rather than months? Do you have a client who has been caught this way? If so, please give as much colour and detail as possible.

2 responses from the Newspage community

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Editor
Harvey Dhillon
Founder & CEO at Zmartly
A signed direct debit mandate shows you meant to pay. Only the bank statement shows you did. The tribunal was right to confirm the £400. Sending The Pensions Regulator a mandate proved nothing about whether the money arrived. Paying late does not wipe out the earlier failure. The duty stays with the employer, even when someone else runs the payroll. The daily fine that can follow is a different question. It starts only once the Regulator has demanded the missing contributions in writing and been ignored. The rate then depends on how many workers it thinks had contributions missed. It is £50 a day for 1 to 4, and £500 a day for 5 to 49. Over a 30-day month the fine is £1,500 or £15,000. The difference is one worker. That is not proportionate. The jump is not aimed at big firms. It lands on the employer with 6 staff and no payroll department. So give one person one job in the week after each payroll run. Check the pension money actually left your account.
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Editor
Nouran Moustafa
Practice Principal & IFA at Roxton Wealth
The tribunal reached the legally correct result, but the case exposes a weak point in the system. Outsourcing payroll does not outsource accountability, yet many small employers genuinely believe a direct debit means the pension duty is “done”. A mandate proves only that payment was authorised, not that a penny reached the scheme.

The £50-to-£500 daily jump at five affected workers is blunt. A business with five staff is not ten times more culpable than one with four, but it can be punished as though it is. That cliff edge will hit small firms with limited cash reserves hardest.

The answer is not another policy document. Employers need a monthly three-way check: payroll records, the business bank account and the pension-provider portal. Someone must confirm the money has left and been allocated, with a bank alert for failed or cancelled direct debits and escalation within 48 hours. Auto-enrolment should be treated like PAYE: delegated operationally, never ignored by the owner.