Micro businesses face a bill of £22m in fines due to lack of understanding around auto-enrolment, it has been estimated.

Approximately 262,000 micro employers - firms classified as having between 1-4 employees - are expected to stage in 2016-2017, according to The Pensions Regulator.

Catherine Pinkney, co-founder of Paycircle, said many of these businesses “don’t think auto-enrolment is relevant to them”.

She analysed the latest information from TPR and highlighted that the report suggested that more than one in five micro employers (21%) still have a limited understanding of their auto-enrolment duties in the weeks before they stage.

This compares to just over one in 10 (12%) small employers (classified as having between five and 49 staff) still in the dark before staging.

Based on fines handed out by the TPR to date — with the £400 Fixed Penalty Notice being the most common — Paycircle estimated the UK’s micro employers could collectively be facing as much as £22m in fines this year.

This was based on about 55,000 micro firms admitting to a lack of understanding as to their responsibilities in the 1-2 months before they stage, putting them at risk of a Fixed Penalty Notice of £400.

Catherine Pinkney, co-founder of Paycircle, said: “The Pensions Regulator has done a huge amount to raise awareness of auto-enrolment responsibilities among the UK’s smallest businesses. Yet despite this comprehensive marketing and educational push, a sizeable chunk of micro employers are still very much in the dark as to what to actually do as their staging date descends on them.

“Given the no-nonsense approach of the regulator in handing out fines, these businesses need to sit up and take note or risk being slapped with a sizeable penalty.

“The concern is that the vast numbers of micro employers still to stage are a hugely diverse and hard-to-reach segment of the business and social care community, ranging from people who employ nannies to those who rely upon personal care assistants. Many don’t even see themselves as employers, which is another problem in itself.

“They just don’t think auto-enrolment is relevant to them.”