Auto enrolment contributions

As an employer, you’ll need to pay pension contributions – just like your employees will have to pay their own contributions each month.

Contributions explained

A pension contribution is the percentage of an employee’s salary that’s contributed to their pension. By law, you’ll need to make pension contributions for certain employees each month that meet the minimum contribution levels set for auto enrolment.

Minimum pension contributions You can choose to pay higher pension contribution levels if you’d like to, but you can’t pay less.
Calculating pension contributions It’s important to check that what you intend to contribute is in line with The Pension Regulator’s most recent figures. The sums shown here should be linked to the minimum contribution levels – the minimum percentages change according to the elements of your employees' pay you include when calculating contributions.

Contribution options

Contributions based on qualifying earnings

  • Qualifying earnings are the portion of an employee’s earnings that must be used when calculating minimum contributions for auto enrolment.
  • You can make your actual contributions on this basis, or calculate them using one of the bases set out here.

Basic pay (set one)

  • If you calculate pension contributions based on basic pay, you’ll only use an employee’s contractual and statutory payments.
  • You can exclude additional payments like overtime, commission and bonuses if you calculate pension contributions on this basis.

Pensionable pay (set two)

  • Pensionable pay refers to any income that is eligible for pension deductions.
  • It can include any other payment or benefit that’s outlined as being pensionable in an employee’s contract of employment.
  • The portion of your employees’ pay you base contributions on must be at least 85% of their total pay.
  • If you pay overtime, commission or bonuses – which change year on year – you would normally need to look at past data to see whether you are likely to meet this minimum before certifying on this basis. If you’re taking on your first employees, you’ll need to assess how you intend to pay them, and see whether their basic pay is likely to be at least 85% of their total pay package.

Total pay (set three)

  • Total pay is 100% of an employee’s earnings
  • It includes any commission, bonuses, overtime and so on.

Contribution options explained

Examples of the contribution types

Ben - a sales employee

Basic pay £35,000 a year
Sales bonus £1,000 a year
Overtime £5,000 a year
Total pay £41,000 a year
Basic pay+
£35,000 a year
Sales bonus+
£1,000 a year
£5,000 a year
Total pay
£41,000 a year

How the different contributions work for Ben

The figures shown here are would be applicable until the 5th April 2019, after which they’ll change to the levels shown above

Amount How is it worked out Minimum employer contribution Minimum total contribution
Qualifying earnings £34,864 £6,136 is deducted from Ben's salary before the percentage that needs to be put into his pension is calculated. £1,045.92 a year
3% of £34,864
£2,789.12 a year
8% of £34,864
Basic pay (set one) £35,000 The percentage that’s put into Ben’s pension is taken from his basic salary. His basic salary will only include contractual and statutory payments. £1,400 a year
4% of £35,000
£3,150 a year
9% of £35,000
Pensionable pay (set two) £36,000 For set two contributions, the percentage put into Ben’s pension is taken from his pensionable pay. To use set two contribution levels, Ben’s pensionable pay must be more than 85% of the total amount an employee earns. Pensionable pay can include any other payment or benefit that is outlined as being pensionable in an employee’s contract of employment. £1,080 a year
3% of £36,000
£2,880 a year
8% of £36,000
Total pay (set three) £41,000 The percentage put into Ben’s pension is taken from 100% of Ben’s salary, including any commission, overtime and bonuses. £1,230 a year
3% of £41,000
£2,870 a year
7% of £41,000

Got a question?

We answer some of the most frequently asked questions about auto enrolment.

Can contribution levels vary between employees?

Yes – under auto enrolment legislation, you can make contributions at different rates for different groups of employees. Remember, though, that auto enrolment legislation doesn’t replace any other employment legislation, so you’ll need to make sure that you comply with all your duties when you make this decision.

Can I make single contributions to a pension?

Yes. You’ll still need to make sure that you make monthly minimum pension contributions, but you can make additional one-off contributions too. For instance, after an employee has been awarded a bonus payment, you might need to make an additional pension contribution as part of your contractual agreement.

Employees can also make single contributions to their workplace pension.

When will I need to make contributions?

You need to work out your contributions each time you pay your staff. Some providers, including Aviva, can only accept monthly contributions – even if you pay your staff more frequently.

How does salary sacrifice work?

An employee agrees to give up part of their salary or bonus in exchange for a pension payment paid by their employer. As an employer, you'll pay lower National Insurance contributions as a result of paying your employees a reduced salary. Your employees will also pay lower National Insurance contributions, and possibly less income tax. You're free to use your National Insurance contribution saving how you wish, some employers might use a portion of it to supplement their employees' pension plans. Employees can choose to use their savings to boost their pension provision or increase their take home pay. Find out more about Government guidelines for salary sacrifice

Find out more about auto enrolment

Auto enrolment doesn’t have to be challenging. We’ve got all the information you need to get up and running with your workplace pension scheme.

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