Boss To Pay Compensation For Late Pension Contribution

Boss To Pay Compensation For Late Pension Contribution.

The Pension Ombudsman Service has ordered an employer in Lincolnshire to pay £500 compensation to an employee for "distress and inconvenience" due to the fact that the employer did not pass on employee pension contributions to the company pension scheme for three months.

The late payment compensation does not reflect any financial losses or gains that the employee would have made if the pension contributions had been invested in a timely manner. It is purely compensation for inconvenience.

In addition, the Pension Ombudsman Service has ordered that the pension company should make calculations to work out the exact value of the pension that would have been in place had the pension payments been made on time. If a financial loss is proved then the employer is ordered to also make good any loss in the value of the pension to put the employee in the exact financial position that they would have been in.

Comment

This is a stark warning to all employers.

If you deduct employee pension contributions from their pay you must pay them over to the pension company by the 19^th day of the following month by the latest. This is not a negotiation, this is not your money, it is your employees money and it is the law.

The £500 compensation for "distress and inconvenience" makes this a very serious issue. You do not have to be a genius to work out that if you make late pension contributions for 10 employees you could face a compensation payment of £5000. If you are late in payment for 100 employees, the precedent has been set and it could be a £50,000 compensation bill. The level of compensation no doubt is designed to act as a "stick" rather than a "carrot" to force employers to pay on time.