What is auto enrolment?

Under auto enrolment, UK employers are legally required to set up a workplace pension, put all their qualifying employees into it and contribute to their pension savings.

The government introduced auto enrolment in 2012 to help more people save for their retirement. Since then around 10 million people have been auto enrolled and are saving for their retirement with their employer’s help.

Auto enrolment in a nutshell

We’ve made it easier for you to comply with your auto enrolment duties by offering a simple, straightforward workplace pension, the NOW: Pensions Trust (the ‘Scheme’), that meets all the regulations and requirements.

To use our Scheme you’ll need to make sure you have systems and processes in place to:

  • properly assess your employees
  • pay the correct contributions on time, and
  • provide accurate member and payroll data within the required timescales.

Starting auto enrolment
If you’re a new employer, you need to be ready to set up auto enrolment as soon as your first employees start work.

What are my legal duties?

Choosing your workplace pension

You can choose an auto enrolment pension yourself. You may want to consider asking a financial adviser to help you, as it’s not an easy decision. But remember, whether you choose our Scheme or another workplace pension, you’ll be responsible for ensuring you comply with all the employer duties under auto enrolment legislation.

Here are some of the things you’ll need to check when choosing your workplace pension.

  • Does the pension scheme comply with the auto enrolment?
  • How easy is it to set up and run?
  • What systems and processes do you need to put in place for running it?
  • What ongoing responsibilities will you have for ensuring the pension scheme runs smoothly and efficiently?
  • How does the investment offering work?
  • Is the scheme easy to understand and use from an employee’s point of view?
  • How are communications with employees handled?
  • Are the charges fair, clear and easy to understand?

Check which employees you need to enrol

Type of employee Eligible jobholder Non-eligible jobholder Entitled worker
Age 22-State Pension age 16-74 16-74
Earns £10,000+ £6,240-£10,000 Below £6,240
Auto enrolment status Must be auto enrolled Can ask to join Can ask to join
Employer contribution status Employer contributions required Employer contributions required Employer contributions are required in line with our Scheme rules.
  • You’re only required to auto enrol eligible jobholders. You must pay contributions towards their pension savings. You must enrol eligible jobholders even if they say they don’t want to join the Scheme.
  • Non-eligible jobholders can ask to join the Scheme. If they ask, you must put them in and pay contributions towards their pension savings.
  • Unless you have alternative pension arrangements for entitled workers, they can also ask to join the Scheme and you must put them in. Our Scheme requires you to pay contributions towards their pension savings.

Calculating contributions

There are several ways you can calculate contributions for auto enrolment. There are statutory minimum contribution levels, but you can choose to set higher contribution levels if you want to.

Qualifying earnings
This is the minimum basis for calculating auto enrolment pension contributions. Qualifying earnings are all earnings between a lower and upper limit set by the government and reviewed each year. In 2021-2022 the lower limit is £6,240 and the upper limit is £50,270.

The minimum auto enrolment contribution to an employee’s pension savings is 8% of qualifying earnings. Employers must pay at least 3% and the employee the remaining 5%.

Qualifying earnings include salary, wages, commission, bonuses, overtime, statutory sick pay and statutory parental leave pay (maternity, paternity and adoption pay).

Basic earnings
These include basic pay, holiday pay and statutory pay such as sick pay or parental leave pay. They don’t include bonuses, commission, overtime and similar payments.
If you use basic earnings to calculate auto enrolment pension contributions, the minimum contribution to an employee’s pension savings is 9%. Employers must pay at least 4% and the employee the remaining 5%.

Total earnings
These are all earnings including basic pay, holiday pay, sick pay, bonuses, commission, overtime and similar payments. If you use total earnings to calculate auto enrolment pension contributions, the minimum contribution to an employee’s pension savings is 7%. Employers must pay at least 3% and the employee the remaining 4%.

Definition Qualifying earnings Basic earnings Total earnings
Includes All earnings between a lower and upper limit set by the government and reviewed each year. Basic pay, holiday pay and statutory pay such as sick pay, but not bonuses, commission, overtime and similar payments. All earnings including basic pay, holiday pay, sick pay, bonuses, commission, overtime and similar payments.
Total minimum contribution 8% 9% 7%
Employer 3% 4% 3%
Employee 5% 5% 4%
Some of the most common options are detailed above. For a more comprehensive list, see The Pensions Regulator’s website.

NOW: Pensions operates a net pay scheme where pension contributions come out of employees’ pay before income tax is taken off. You’ll need to make sure your system is set up to calculate pension contributions on your employees’ gross (before tax) pay.

This means taxpayers automatically get full tax relief – they don’t pay any income tax on their pension contributions.

Employees who don’t earn enough to pay tax don’t normally get tax relief, but we’ve set up our Scheme so they don’t miss out. They can claim tax relief through our tax top-up scheme.

Find out more