If your client doesn’t have access to payroll software that will make automatic enrolment calculations - for example if they use HMRC Basic PAYE Tools to manage payroll - the following information will help you complete their automatic enrolment duties.
Key points
- We have tools and information so that you can help your client meet their duties.
- The HMRC Basic Payroll Tools will not assess your client’s staff or supply information to their pension scheme.
Assessing who to enrol
One of your client’s automatic enrolment duties is to enrol eligible staff into a workplace pension scheme and to make contributions into the scheme. You can work out which of your client’s staff they’ll need to enrol manually using the information on our page on checking who to enrol.
Calculating contributions
One of your client’s automatic enrolment duties will be to pay regular pension contributions in respect of staff they’ve enrolled into their workplace pension scheme, as well as any who choose to opt in. You can find information on how to calculate contributions and the contributions rates for 2019 and onwards in our page on working out your client’s costs.
We are unable to show you exactly how much your client will have to pay as the exact calculation method will be determined by the pension scheme they choose. Therefore, it is important your client understands from their pension scheme how to calculate pension contributions. We advise you or your client to contact their pension scheme to find out this information.
The law has set a minimum level for employer contributions – this is 3% from 6 April 2019. The calculation example below uses the minimum contribution levels, and contributions are calculated based on earnings between a lower and upper threshold. The minimum level is a common calculation method used by many schemes. However, other pension schemes may use alternative methods such as calculations based on all earnings or alternative thresholds.
The minimum contribution level for the current tax year is a total contribution of 8% (with at least 3% of that contributed by the employer). The minimum contribution level is calculated based on pensionable pay between the following lower and upper qualifying earnings levels.
2023 to 2024
Lower level of qualifying earnings
- Annual: £6,136
- 1 week: £120
- 1 month: £520
Upper level of qualifying earnings
- Annual: £50,270
- 1 week: £967
- 1 month: £4,189
Examples:
- A staff member earns £200 a week. Weekly earnings are above the lower earning threshold of £120, so £200 - £120 = £80 of earnings to calculate contributions against. Therefore:
- 8% of £80 = £6.40, the minimum total contribution
- 3% of £80 = £2.40, the minimum amount the employer must contribute as part of the total
- £4.00 the remaining 5% which the staff member will contribute (unless the employer opts to pay all or part of it depending on the scheme rules).
- A staff member earns £1,000 a week. As contributions are only calculated on pay between the upper and lower thresholds, pay above the upper threshold is disregarded and the total is reduced to £967. Applying the lower threshold as well, £967 - £120 = £847 of earnings to calculate contributions against. Therefore:
- 8% of £847 = £67.76, the minimum total contribution
- 3% of £847 = £25.41, the minimum amount the employer must contribute as part of the total
- £42.35 the remaining 5% which the staff member will contribute (unless the employer opts to pay all or part of it depending on the scheme rules).
Payroll processes
You can find help on the actions to consider to ensure your client’s payroll process can support automatic enrolment on checking records and payroll processes.
If you are unsure of whether your client’s payroll software is designed to carry out all the tasks to help them meet their ongoing duties, read checking payroll software supports automatic enrolment.
If your client manages their payroll using HMRC's Basic PAYE Tools, please be aware that HMRC will not assess your client’s staff or supply information to their pension provider.
A guide to finding both free and paid-for payroll software can be found on GOV.UK.
Pension contributions for HMRC Basic PAYE Tools users
As part of completing their real time information return, your client will need to input pension contribution amounts for the member of staff (where applicable) into the HMRC Basic PAYE Tools.
When your client sets up their pension scheme, they will agree with the scheme:
- the percentage of earnings that will be paid by the employer and member of staff
- which earnings will be used to calculate pension contributions (the pensionable earnings), for example qualifying earnings, basic pay, or all pay
- when pension contributions are to be paid (the due date)
Your client should ask their pension scheme how much the contributions should be and when they should pay them. They can then input this information into the Basic PAYE Tools. Your client will need to know whether contributions should be paid from gross pay (commonly known as a ‘net pay arrangement’) or net pay (commonly known as a ‘relief at source’ arrangement). Make sure your client checks this and inputs the corresponding gross or net pension contributions into the tool.