Employer pension contributions: minimums and calculations

The legal minimum employer pension contribution is 3% of an employee’s qualifying earnings, with the employee topping the total up to at least 8%. For 2026/27, qualifying earnings are pay between £6,240 and £50,270 a year, so on a £30,000 salary the employer pays at least £712.80. You can pay more, and you can use a different pay basis if you certify it.

What is the minimum employer pension contribution?

The minimum is 3% of qualifying earnings for every member of staff you auto-enrol. GOV.UK sets the total minimum at 8%: at least 3% from you and the rest from the employee, including tax relief.

If you pay, say, 5%, the employee only needs to pay 3% to reach 8%. The Pensions Regulator says the total minimum has applied from 6 April 2019.

What are qualifying earnings in 2026/27?

Qualifying earnings are the band of gross pay between the lower and upper limits. They include salary, wages, bonuses, commission, overtime and statutory sick, maternity, paternity, adoption, shared parental, parental bereavement and neonatal care pay. TPR’s 2026/27 thresholds are unchanged from 2025/26.

You must auto-enrol staff aged 22 to State Pension age who earn over £10,000 a year (£833 a month). Contributions are worked out on pay in each pay period, not the annual figure.

How do you calculate employer pension contributions?

Use these steps for each pay period.

1. Take the employee’s gross qualifying pay for the period.
2. Subtract the lower limit (£520 a month, for monthly pay).
3. Cap the result at the upper limit minus the lower limit (£3,669 a month).
4. Multiply by your employer rate, at least 3%.
5. Multiply by the employee rate, at least 5% less anything you pay above 3%.

Worked example: £2,500 a month. Qualifying earnings are £2,500 minus £520, which is £1,980. The employer pays 3%, which is £59.40. The employee pays 5%, which is £99.00, for £158.40 in total each month.

Worked example: £30,000 a year. Qualifying earnings are £23,760. The employer pays £712.80 and the employee £1,188, so £1,900.80 goes in over the year.

Worked example: £60,000 a year. Earnings above £50,270 do not count, so qualifying earnings are £44,030. The employer minimum is £1,320.90.

Our pension contributions calculator does these sums, and the employer cost calculator adds pension to salary and employer National Insurance.

How does tax relief change the employee’s deduction?

The employee’s 5% includes tax relief, so what comes out of pay depends on the scheme’s method. Under relief at source, you deduct 4% from net pay and the scheme claims the other 1% from HMRC. Under net pay, you deduct the full 5% before income tax is worked out.

On the £30,000 example, relief at source means £950.40 from net pay plus £237.60 of relief. Your choice of scheme decides the method, so check it before you set up payroll.

Can you use a different earnings basis?

Yes. Instead of qualifying earnings, you can pay on a wider pay basis if you certify that the scheme meets one of three sets. Nest’s certification guide summarises them.

Certification can simplify payroll because there is no lower limit to deduct. Nest says you must keep a copy of the certificate for six years after it expires.

When must contributions be paid?

Contributions deducted from pay must reach the scheme by the 22nd of the month after the deduction, or the 19th if you pay by cheque. TPR can act if payments are late. Keep payroll and pension records so you can show what was paid and when; see payroll records.

How are employer pension contributions taxed?

Employer contributions are a business expense, and they are free of National Insurance for both employer and employee. HMRC’s Pensions Tax Manual says relief is given only on contributions actually paid, in the period they are paid, and they must meet the wholly and exclusively test. Large one-off contributions may be spread over future years.

For controlling directors, HMRC accepts contributions in line with what an unconnected employee in a similar role would get. See director pension contributions.

Salary sacrifice is changing. From 6 April 2029, only the first £2,000 a year sacrificed into a pension will be free of National Insurance. Read the salary sacrifice cap before you redesign pay.

What to do now

1. Check your scheme’s earnings basis and tax relief method.
2. Test payroll on one employee per pay band, using the worked examples above.
3. Diary the 22nd of each month for payments to the scheme.
4. Review whether paying above 3% helps recruitment, using the salary sacrifice calculator to compare routes.

Frequently asked questions

What is the minimum employer pension contribution in 2026/27?

It is 3% of qualifying earnings, which are earnings between £6,240 and £50,270 a year. The total minimum, including the employee’s share, is 8%.

Do employers pay pension on the first £6,240?

Not under the qualifying earnings basis. You only pay on earnings above the lower limit, unless you have certified a basis such as Set 1, which counts pay from the first pound.

Can an employer pay the full 8%?

Yes. If you pay the whole 8%, the employee does not have to contribute, and the minimum is still met.

Are employer pension contributions tax deductible?

Yes, when they are paid and meet the wholly and exclusively test. HMRC gives relief in the accounting period of payment, and large contributions may be spread.

Is auto-enrolment going up to 12%?

Not at present. The government has ruled out changing contribution rates this Parliament; see auto-enrolment at 12%.