Auto enrolment knowledge centre

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.  See below for the options available.

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

Contributions based on qualifying earnings

Qualifying earnings are also known as banded earnings. This is the portion of an employee’s earning that must be used when it comes to working out the minimum contributions. This includes basic pay, overtime, bonuses, commission, statutory sick pay, and statutory maternity, paternity or adoption pay.

For 2019/20, qualifying earnings are set between £6,136 and £50,000. This means that the first £6,136 of an employee’s qualifying earnings is not included when calculating pension contributions.

  From 6th April 2019 onwards
Employer contributions 3%
Total contributions 8%

Basic pay (set one)

Set one contributions take into account an employee’s contractual and statutory payments, but exclude overtime, commission and bonuses.

  From 6th April 2019 onwards
Employer contributions 4%
Total contributions 9%

Pensionable pay (set two)

To use set two contribution levels, the employee’s pensionable pay needs to be higher than basic pay, and at least 85% of the total amount an employee earns.

  From 6th April 2019 onwards
Employer contributions 3%
Total contributions 8%

Total pay (set three)

With set three contributions, you’ll need to take into account an employee’s total pay – that includes any bonuses, commission and overtime on top of their salary.

  From 6th April 2019 onwards
Employer contributions 3%
Total contributions 7%

Examples of the contribution types

Got a question?

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

Can contribution levels vary between employees?

Can I make single contributions to a pension?

When will I need to make contributions?

How does salary sacrifice work?

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.

Employers

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