Employers are at risk of falling into ‘pension pitfalls’ due to complex pension legislation and increased minimum wage, Hymans Robertson has warned.

The consultancy noted that employer pension errors were unlikely to appear a large-scale obvious failings, but rather mistakes that creep in quietly.

Increasing complexity around rules that employers are navigating may be presenting a level of risk they are not aware of, with auto-enrolment requirements layered on top of existing policies alongside differing employer matching and scheme contribution rules, tax relief and salary sacrifice, and minimum wage legislation.

Hymans Robertson cautioned that these pitfalls could leave employers facing compliance and financial risks.

The consultancy urged employers to avoid these issues by urgently reviewing their pension and salary sacrifice arrangements, arguing that a clear organisation-wide review of pension processes could protect both employees and the business.

“Many employers may not be aware of the risk of pension contribution discrepancies that could be running in their businesses,” commented Hymans Robertson head of DC corporate consulting, Hannah English.

“These changes to regulatory requirements come at a time when many organisations have made real headway into improving family career benefits, sabbaticals, sick leave and salary sacrifice terms.

“So, it’s not surprising to see increased complexity feeding though in unintended ways to the calculated pension benefits.

“If employers fail to review processes, these issues can lead to breaches of contract, regulatory action, fines and possible legal challenge.

“Trust with staff can erode quickly when pension handling does not match expectations, and reputational harm can follow at a time when confidence in workplace benefits is more important than ever.

“At the heart of the problem is the growing complexity of rules that many employers are navigating without realising the level of risk they carry.”

Leave periods were highlighted as an area that could create further pressure points, alongside salary sacrifice, with the consultancy warning that it was easy for contributions to be calculated incorrectly for long stretches when payroll and HR are not aligned.

English noted that these pressure points were catching employers out as they did not appear as big, obvious failing, and these issues did not sit neatly into separate boxes.

“One small mismatch can trigger another, and soon the organisation is carrying risks no one spotted early on,” she continued.

“None of this comes from bad practice. It comes from systems, legislation and benefit rules all moving at different speeds.

“That’s why employers need to understand how their policies work in practice rather than assuming they’re working as intended.”

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