Since 2018, all UK employers must automatically enrol eligible workers into a workplace pension scheme and make contributions. This is known as auto-enrolment, and failure to comply can result in significant fines from The Pensions Regulator (TPR).
Employees are automatically enrolled if they meet all of these criteria:
Aged between 22 and State Pension age (66)
Earn at least £10,000 per year (the auto-enrolment trigger)
Work in the UK
Workers aged 16-21 or 67-74 who earn above £6,240 are "non-eligible jobholders" — they can opt in, and if they do, you must contribute. Workers earning below £6,240 are "entitled workers" who can join the scheme but you don't need to contribute.
Minimum Contribution Rates for 2026/27
Contributor
Minimum Rate
Notes
Employer
3%
Of qualifying earnings
Employee
5%
Including tax relief
Total minimum
8%
Combined
Many employers choose to contribute more than the 3% minimum as part of their benefits package. Some contribute 5%, 8%, or even match employee contributions pound for pound.
The qualifying earnings band for 2026/27 is £6,240 to £50,270 per year. Pension contributions are only calculated on earnings within this band, not on the full salary.
There are two main approaches to calculating pensionable pay:
Qualifying Earnings Scheme
Contributions are calculated on earnings between the lower limit (£6,240) and upper limit (£50,270). This is the most common approach and results in lower overall contributions.
Total Earnings Scheme
Contributions are calculated on the full salary from the first pound. This results in higher contributions but better retirement outcomes for employees.
Annual Salary
Employer 3% (Qualifying)
Employer 3% (Total)
Difference
£20,000
£413
£600
+£187
£25,000
£563
£750
+£187
£30,000
£713
£900
+£187
£40,000
£1,013
£1,200
+£187
£50,000
£1,313
£1,500
+£187
£60,000
£1,321
£1,800
+£479
The difference is consistent at £187 per year for salaries within the qualifying earnings band (the 3% on the first £6,240). Above £50,270, qualifying earnings are capped.
Employees have the right to opt out of the pension scheme within one month of enrolment. If they opt out within this window, any contributions already deducted must be refunded.
However, employers must re-enrol opted-out employees every 3 years. You must check your workforce on the 3-year anniversary of your staging date and re-enrol anyone who previously opted out but still meets the criteria.
Postponement
Employers can postpone auto-enrolment for up to 3 months for new hires. This can be useful for roles with high early turnover, but you must notify the employee in writing within 6 weeks.
Not re-enrolling: forgetting the 3-year cyclical re-enrolment duty
Wrong earnings basis: using basic pay instead of qualifying earnings (which should include overtime, bonuses, and commission)
Missing the trigger: not monitoring when employees cross the £10,000 threshold
Late contributions: pension contributions must be paid to the provider by the 22nd of the month following deduction (19th for cheques)
Not including all pay types: qualifying earnings include overtime, bonuses, commission, and statutory payments like SSP and SMP
Employers must keep records for 6 years, including:
Names and addresses of enrolled employees
Dates of enrolment, opt-outs, and re-enrolment
Contribution amounts and dates paid
Pension scheme reference numbers
Declaration of compliance with TPR
You must also complete a Declaration of Compliance with The Pensions Regulator within 5 months of your staging date, and a Re-declaration every 3 years.
Salary exchange (also called salary sacrifice) is an arrangement where employees agree to reduce their gross salary, and the employer pays the equivalent amount into the pension instead. Both parties save National Insurance on the exchanged amount.
Popular workplace pension providers include NEST (the government-backed scheme), The People's Pension, NOW: Pensions, and various insurance company schemes. Key factors to consider:
Charges: annual management charges typically range from 0.3% to 0.75%
Ease of use: how well the provider integrates with your payroll software
Investment options: range and quality of investment funds
Employee experience: quality of online portal and communications
Key Takeaways
All UK employers must auto-enrol eligible employees and contribute at least 3%
Qualifying earnings for 2026/27: £6,240 to £50,270
Total earnings schemes result in higher contributions but better outcomes
Re-enrolment is required every 3 years
Salary exchange can reduce NI costs for both employer and employee
