Qualifying earnings: how pension contributions work
Qualifying earnings for the 2026-27 tax year are the slice of a worker's gross pay between £6,240 and £50,270, and the statutory minimum contribution on that slice is 8%, of which the employer funds at least 3% [1]. Both figures have been held at their previous levels, so the band an employer applied last tax year still applies now [2].
Qualifying earnings sit at the centre of every workplace pension calculation, yet the term is often confused with gross pay or with basic salary. Getting the definition wrong means either under-funding a worker's pension, which breaches the employer duty, or over-deducting, which triggers refunds and complaints [1].
This article sets out what qualifying earnings are, which parts of pay count, how the contribution is worked out with a worked example, how the qualifying-earnings basis compares with the alternative certified bases, and why the same figure interacts with the £10,000 earnings trigger without being identical to it.
Key takeaways
- Qualifying earnings for 2026-27 are gross pay between £6,240 and £50,270.
- The statutory minimum contribution is 8% of qualifying earnings, employer at least 3%.
- Salary, wages, overtime, bonuses, commission and statutory pay all count.
- Earnings below £6,240 and above £50,270 are excluded from the calculation.
- Employers may certify an alternative basis using basic or total pay.
- Qualifying earnings must be recalculated for every pay period, not annualised.
What qualifying earnings are
Qualifying earnings are defined in statute, not by scheme rules. Section 13 of the Pensions Act 2008 sets qualifying earnings as a worker's gross earnings between a lower and an upper limit in the relevant pay reference period [3]. For the 2026-27 tax year that band runs from £6,240 to £50,270 [2].
The word "qualifying" describes the band, not the worker. Every pound below the lower limit and every pound above the upper limit falls outside the calculation, which is why a higher earner and a middle earner can end up with contributions based on a similar capped figure [1]. The band feeds directly into the workplace pension contributions an employer remits each period, so a clear grasp of it underpins the whole duty [4].
The pay that counts
Qualifying earnings include far more than basic salary. The statutory definition captures salary, wages, commission, bonuses and overtime, together with statutory sick pay and statutory family pay such as maternity, paternity and adoption pay [3]. A worker on statutory maternity pay therefore continues to build qualifying earnings even while away from normal duties [4].
This breadth is where errors creep in. Basic pay is a narrower concept that disregards commission, bonuses and overtime, so an employer that pays a lot of variable pay will calculate a very different figure depending on which basis the scheme uses [4]. Businesses running payroll for SMEs with heavy overtime or seasonal bonuses need to confirm which definition their scheme applies before the first payrun [3].
The band that matters
The qualifying-earnings band is set for the year and then divided down to the length of each pay period. The annual figures translate into the monthly and weekly triggers a payroll actually uses [1].
| Threshold | Annual | Monthly | Weekly |
|---|---|---|---|
| Lower earnings limit | £6,240 | £520 | £120 |
| Upper earnings limit | £50,270 | £4,189 | £967 |
Because the limits are pro-rated per period, a worker paid monthly has the first £520 of pay excluded and any pay above £4,189 capped [1]. Applying the annual band to a monthly payslip is a common miscalculation that either exempts too much pay or fails to cap it [8].
How the contribution is calculated
The mechanics are straightforward once the band is applied. The employer takes gross pay for the period, subtracts the lower limit, caps anything above the upper limit, and applies the contribution rates to what remains [5]. Contributions are worked out on gross pay before tax and National Insurance are deducted [5].
Take a worker earning £20,000 a year. Their qualifying earnings are £13,760, because that is the portion of pay sitting inside the band [5]. The statutory minimum of 8% on £13,760 comes to roughly £1,101 a year in total contributions, of which the employer funds at least 3% [1].
| Contribution | Minimum rate | Basis |
|---|---|---|
| Employer | 3% | Qualifying earnings |
| Worker (including tax relief) | 5% | Qualifying earnings |
| Total | 8% | Qualifying earnings |
The split between the worker's own money and tax relief depends on whether the scheme uses relief at source or a net pay arrangement, but the headline 8% is fixed [4]. Most HMRC-recognised payroll software applies the band and the rates automatically for every worker on every run [5].
Qualifying earnings versus a certified basis
The qualifying-earnings band is the default, but it is not the only lawful basis. An employer whose scheme is built on basic pay or total pay can certify to The Pensions Regulator that the scheme meets one of three alternative quality tests [6]. Each test carries its own minimum rates to make up for measuring pay differently [6].
| Basis | Pay measured | Minimum total | Employer minimum |
|---|---|---|---|
| Qualifying earnings | Band £6,240 to £50,270 | 8% | 3% |
| Set 1 | Basic pay | 9% | 4% |
| Set 2 | Basic pay (85% test) | 8% | 3% |
| Set 3 | Total pay | 7% | 3% |
A wider earnings base carries a lower percentage because it is applied to a bigger number, which is why the total-pay basis sits at 7% while basic pay sits at 9% [6].
When employers certify an alternative basis
Certification suits employers who prefer to calculate contributions on a single, simple definition of pay rather than tracking the band each period [6]. A certificate lasts up to 18 months and must then be renewed after checking the scheme still passed the relevant test across the period it covered [6].
Accountants running this across a book of clients often standardise the basis to keep processing consistent. A multi-client payroll platform can hold a different contribution basis per employer while still applying each one correctly at run time [4].
Qualifying earnings and the £10,000 trigger
Qualifying earnings and the earnings trigger are easy to blur, but they do different jobs. The £10,000 trigger decides whether a worker must be enrolled at all, while qualifying earnings decide how much goes into the pension once they are [8]. The trigger was also held at £10,000 for 2026-27 to keep participation stable during the current pensions review [9].
The distinction matters when pay moves. A one-off bonus or a burst of overtime can lift a worker over the trigger in a single pay period, which can create an enrolment duty even where the annual salary sits below £10,000 [7]. Because assessment happens per pay period on actual earnings, variable and irregular workers must be reassessed each time rather than judged on an annual estimate [7]. Handling that reliably at scale is one reason platforms building on a UK payroll engine automate per-period assessment rather than leaving it to manual review [8].
Conclusion
Qualifying earnings are the quiet engine behind every workplace pension figure. The band, held at £6,240 to £50,270 for the 2026-27 tax year, converts a worker's messy real-world pay into a single capped number that the 8% minimum can be applied to cleanly.
The stability of the thresholds gives employers one fewer moving part to track, but it does not remove the need for accuracy on the pieces that do move. Which parts of pay count, whether the scheme uses the band or a certified basis, and how a one-off spike interacts with the £10,000 trigger all still turn on getting the definition right every pay period, not once a year.
Frequently asked questions
Are bonuses and overtime included in qualifying earnings?
Yes. The statutory definition of qualifying earnings includes salary, wages, commission, bonuses and overtime, alongside statutory sick and family pay [3]. This is different from basic pay, which excludes variable elements, so an employer using the qualifying-earnings basis must fold bonuses and overtime into the calculation for the period in which they are paid [4].
What is the difference between qualifying earnings and pensionable pay?
Qualifying earnings are the statutory band between £6,240 and £50,270 used to measure the minimum contribution [1]. Pensionable pay is whatever definition a particular scheme chooses, which may be basic pay, total pay or the qualifying-earnings band itself, provided the resulting contribution meets or beats the statutory minimum on a certified test [6].
Do qualifying earnings change each tax year?
They can, because the limits are reviewed annually by the Department for Work and Pensions. For the 2026-27 tax year the lower limit stayed at £6,240 and the upper limit stayed at £50,270, and the £10,000 earnings trigger was also unchanged [2]. Employers should still check the figures at the start of each tax year, as a change in any limit feeds straight into every contribution calculation [9].
How are qualifying earnings worked out for a monthly payslip?
The annual band is divided down to the pay period. For a monthly payroll the first £520 of pay is excluded and anything above £4,189 is capped, and the 8% minimum is then applied to the remainder [1]. The calculation runs on gross pay before tax and National Insurance are taken off, and it must be repeated for each period rather than annualised [5].
