Between 1.6 and 1.7 per cent of auto-enrolled employees did not get the employer pension contributions they were entitled to in 2019, equivalent to 250,000 workers, the Resolution Foundation has estimated.

The think-tank’s report, Enrol up!, revealed that around three-quarters of employees who had received below the 2 per cent minimum from their employer had received zero contributions in the period.

It emphasised that underpayment was concentrated amongst a particular group of workers, with contingent workers “more likely to lose out”.

In particular, it found that up to 2 per cent of temporary workers and people employed through an agency received employer contributions below the legal minimum, compared to 1.7 per cent of their permanent peers.

The report acknowledged that workers on less secure contracts may have more fluctuating earnings, making it more complex to calculate the correct contributions, but emphasised that “there is no excuse for noncompliance”.

Workers in hospitality, administration, construction and support were also more likely than average to be underpaid on their contributions, with hospitality ranking the highest amongst these sectors.

The think-tank argued that this trend is likely linked to the lower pay in these sectors, with employees on the very lowest hourly pay rates most likely to have their contributions underpaid.

However, the highest rate of underpaid contributions was in finance, which also had an above-average underpayment rate in 2018 and 2017.

The report also estimated that 3 per cent of eligible employees have not been auto-enrolled, not including opt-outs and cessations, representing around 600,000 workers.

However, the foundation argued that the regulator “appears to be striking the right balance between the two side's of the enforcement coin”, having issued 2.8 times as many compliance notices as unpaid contribution notices.

Furthermore, it emphasised that whilst 3 per cent is a relatively low rate, noncompliance can be much more prevalent in some areas of the labour market, with contingent workers again disproportionately impacted.

Specifically, it found that as many as one in 10 eligible agency workers have not been automatically enrolled, whilst part-time and temporary workers are more than twice as likely not to have been enrolled as their full time and permanent counterparts.

Meanwhile, the lowest paid workers, earning around the wage floor, were around three times more likely to face noncompliance issues.

The foundation acknowledged that this could reflect administrative difficulties and delays, also noting that the short contracts of temporary workers mean they are more than three times as likely to be around the three-month postponement threshold.

It explained that some non-enrolment rates could reflect those who have only just become eligible and whose employers are late to enrol them, rather than deliberate noncompliance.

Indeed, whilst nine per cent of employees who have been in a post for four months were not enrolled, this fell to just 3 per cent for those who have been in their role for a full year.

The foundation argued however, that employers should be taking these factors into account to ensure that all workers get the benefits they are entitled to, with contingent workers continuing to be disproportionately impacted.

The think-tank found that sectors that disproportionately employee people who are not eligible for auto-enrolment are also “much more likely” to fail to enrol those who are eligible.

Considering this, it argued that if the eligibility criteria for AE was shifted to lower the age limit of earnings threshold, this would increase the compliance and enforcement challenge for The Pensions Regulator (TPR) “dramatically”, as these are “exactly the type” of employees most risk of not being enrolled by their employer, or being underpaid.

The report suggested that the regulator could arguably undertake “more proactive enforcement” in line with a shift towards ongoing monitoring, now that only new business are enrolling their workers for the first time.

It suggested that the regulator prioritises collaboration with other enforcement bodies, given that similar groups are vulnerable to auto-enrolment noncompliance as they are subject to other labour market violations.

The report also compared high-risk industries flagged by the foundation with data from TPR on the issuance of compliance notices, finding that there is currently almost “no relationship” between a sector’s non-enrolment rate and how many compliance notices it has been issued.

Considering this, it recommended that the regulator’s ongoing enforcement activities focus on the high-risk areas highlighted in the report in particularly arguing that both greater guidance to navigate “tricky areas” such as temporary staff could be given, as well as greater scrutiny on firms in high risk categories.

However, it also highlighted the regulator as “one, if not the best performer” when it comes to clarity of communication to firms, stating that as a result, it is arguable that much of the non-compliance identified is deliberate rather than accidental, and that firms “should be taken to task more quickly” than is currently the case.

Commenting in response to the report, a TPR spokesperson stated: “The Resolution Foundation’s report makes clear that more than 98 per cent of workers enrolled in a workplace pension are receiving the appropriate level of employer contributions.

“This means the vast majority of employers are successfully meeting their AE duties and are doing the right thing for their staff.

“For the small minority of employers who fail to comply with the law, we will use our statutory powers where appropriate, including issuing fixed and escalating penalty fines

“Between 2019-2020, we issued 48,267 fines for failures to comply with AE duties.”

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