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

It’s important to remember that this applies to businesses of all sizes – even if you have just one employee.

Minimum pension contributions

The current level of minimum contributions is shown below. You can choose to pay higher pension contribution levels if you’d like to, but you can’t pay less. The following figures apply to a Relief at Source scheme, like the Aviva workplace pension, which is a Group Personal Pension scheme. The calculation works differently for other types of pension scheme.

Employee contribution
(from gross salary)

Employer’s contribution

Total contribution

5% of employee's salary 3% of employee's gross salary 8% of employee's gross salary

The rate of minimum contributions is fixed, but you have an element of choice in deciding how you work out what you need to pay into your employees’ pensions.

For instance, you could choose to pay a fixed amount, instead of calculating percentages, provided this is at least the equivalent of the minimum contribution. There’s also some choice around the question of what counts as earnings – more on this below.

What types of earnings do the contributions apply to?

Employers starting their auto enrolment duties are often unsure what counts as earnings for the purpose of working out contributions.

For example, if the employee decides to contribute 5% of their salary, then the employer needs to clarify whether this includes bonus payments. You need to decide this, together with your pension provider, when your pension scheme is created.

Contributions based on qualifying earnings

The portion of an employee’s earnings normally used when calculating minimum contributions is known as ‘qualifying earnings’.

This includes:

  • Basic pay
  • Overtime
  • Bonuses
  • Commission
  • Statutory sick pay
  • Statutory maternity, paternity or adoption pay

Within this, there’s a minimum and maximum level of earnings which can be regarded as qualifying earnings. In the 2024/2025 tax year, qualifying earnings start at £6,240 and end at a ceiling of £50,270.

You can make your actual contributions on this basis, or calculate them using one of the three bases, known as ‘sets’, which we’ve set out below. 

Pensionable 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.


Which approach to calculating contributions would be best for me?

We’ve included examples of the different ways to calculate contributions below. They should help to clarify an aspect of auto enrolment which can easily seem confusing. 

There’s a lot to consider and understand when you’re deciding which method would work best for your business and your employees, and we’d recommend that you seek professional advice if you’re unsure how to proceed.

Examples of the contribution types

  • Basic pay

    £35,000 a year

  • Sales bonus

    £1,000 a year

  • Overtime

    £5,000 a year

  • Total pay

    £41,000 a year

How the different contributions work for Ben

Types Amount How is it worked out Minimum employer contribution Minimum total contribution
Qualifying earnings £34,760 £6,240 is deducted from Ben's salary before the percentage that needs to be put into his pension is calculated. £1042.80 a year, 3% of £34,760 £2,780.80 a year, 8% of £34,760
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

How do I process the contributions?

If you choose to pay by cheque, you have to make sure your employees’ contributions are paid into your workplace pension scheme by the 19th day of the month following the date on which the contributions were deducted from the scheme member's salary. If you choose to pay by any other method, then this becomes the 22nd day.

If you’ve chosen the Aviva workplace pension, our online management system can make it easy for you to calculate how much is due. We can also integrate the calculation with your payroll software to make processing contributions less time-consuming.

How is the money invested?

Workplace pensions typically offer a choice of investment funds to reflect the life stages, priorities and personal choices of employees. These funds may be built up from different types of assets – including UK or international company shares, government bonds, property or money market instruments.

In practice, some employees won’t have the time – or the financial experience – to make choices between individual investments or manage ongoing changes to their investment portfolios. This is why most providers also offer access to an expertly managed ‘default fund’, built to meet the needs of the majority of employees.

With Aviva’s workplace pension, employees will be enrolled into our carefully designed default fund – though, other investment funds are available. Find out more about Aviva workplace pension investment options.

How should I plan to meet the cost of contributions?

It’s important to look carefully at your balance sheet or projections to make sure you’re prepared to meet the cost of auto enrolment. In addition to the contributions themselves, you need to factor in expenses such as your pension provider’s charges, payroll cost and the outlay that comes with assessing and communicating with employees. You also need to consider whether you should pay for financial advice.

What do I need to communicate to my employees?

Once you’ve assessed which of your staff are eligible for the scheme, you’re required by law to write to each of them individually to explain how auto enrolment will affect them. You also need to tell them how your chosen workplace pension scheme works.

You can do this by letter or email. If you’ve chosen Aviva’s workplace pension, you need to do this before you let us know the details of employees who will be joining the scheme. This is important because it affects the date on which employees can choose to opt out.

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.

Aviva Workplace Pension

Our workplace pension is designed to give you a scheme that’s easy to set up and administer, ideal for your auto enrolment needs.

Find out about the Aviva Workplace Pension


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