Workplace Pension Contributions Explained: Employer Guide 2026/27
Understand workplace pension contribution rates, qualifying earnings, and auto-enrolment duties. Includes comparison of pension scheme types.
Auto-Enrolment: Your Duties as an Employer
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).
Use our workplace pension calculator to see exactly how much you and your employees will contribute.
Who Must Be Enrolled?
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.
Understanding Qualifying Earnings
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.
For an employee earning £30,000:
- Qualifying earnings: £30,000 - £6,240 = £23,760
- Employer contribution (3%): £23,760 × 3% = £712.80
- Employee contribution (5%): £23,760 × 5% = £1,188
- Total contribution: £1,900.80
Qualifying Earnings vs Total Earnings
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.
Opting Out and Re-Enrolment
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.
Common Employer Mistakes
- 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
Record Keeping and Compliance
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: Saving on Pension Contributions
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.
For details on how salary exchange works and the potential savings, see our salary sacrifice pension guide or model the figures using our pension calculator.
Choosing a Pension Provider
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
Calculate your exact pension obligations with our workplace pension calculator.