Workplace Pension Contributions Explained
Three parties pay into a UK workplace pension: the worker, the employer, and the government through tax relief [1]. The employer must contribute for any eligible worker earning over £6,240 a year, and contributions must reach the pension scheme on time, usually by the 22nd of the month following the deduction [1] [3].
Behind that simple structure sits a set of rules that decide which earnings count, when the money must move, and how each contribution appears on the payslip. Getting any of these wrong is a compliance failure, not a rounding error.
This article explains who pays into a workplace pension, what the contributions are calculated on, the deadline for paying them over, what happens when a worker opts out, and how the amounts should be shown on a payslip.
Who pays into a workplace pension
A workplace pension set up under automatic enrolment has three contributors, and the worker only funds part of the total [1]. The employer's share is a legal minimum, not a discretionary top-up.
The employer, the worker and the government
The total minimum contribution is 8% of qualifying earnings, made up of at least 3% from the employer and 5% from the worker, with the worker's share including tax relief from the government [1] [8]. The government's contribution is delivered as tax relief: money that would otherwise have gone to HMRC as income tax is redirected into the pension instead [9].
An employer cannot pay less than its 3% share, and it cannot recover its own contribution from the worker's wages [2]. The table below sets out who funds each part of the standard minimum.
| Contributor | Standard minimum share | How it is paid |
|---|---|---|
| Employer | 3% of qualifying earnings | Paid on top of wages |
| Worker | Balance to reach 8% (usually 5%) | Deducted from pay |
| Government | Part of the worker's share | Tax relief added to the pot |
Calculating and applying these shares each pay run is a core function of HMRC-recognised payroll software, which works out the split automatically once the scheme is configured.
What contributions are calculated on
Contributions are not worked out on a worker's whole salary. They are based on a defined slice of pay, and the definition an employer uses affects how much goes in [4].
Qualifying earnings and what counts
Under the default qualifying-earnings basis, contributions apply to earnings between £6,240 and £50,270 a year [1]. Those earnings include wages, salary, commission, bonuses, overtime and statutory payments such as sick pay and maternity, paternity and adoption pay [4].
An employer can instead base contributions on basic pay or total pay, provided the scheme is certified to meet an equivalent minimum [4]. The choice matters for variable pay: on a basic-pay basis, overtime and bonuses may be excluded, while on a total-pay basis they are included [10]. For businesses running payroll for SMEs with irregular hours, the earnings basis has to be reassessed against actual pay each period.
When contributions must be paid over
Deducting a contribution is only half the duty. The money must then reach the pension provider by a statutory deadline, and late payment is reportable to The Pensions Regulator [3].
The payment deadline
Contributions deducted from a worker's pay in one month must normally reach the scheme by the 22nd of the following month where payment is made electronically [3]. This mirrors the deadline that applies to PAYE tax and National Insurance, so the two obligations sit in the same monthly cycle [10].
An employer that sets up a scheme late must backdate contributions to the date each worker first met the eligibility criteria, paying the amounts that should have been contributed in the interim [2]. A multi-client payroll dashboard helps a bureau track remittance deadlines across many employer schemes so no client slips past the 22nd.
Opting out and refunds
Automatic enrolment is automatic, but it is not compulsory for the worker. A worker who is enrolled has a statutory right to opt out, and the employer must handle that request within strict limits [5].
The one-month window
The opt-out window is one calendar month, running from the later of the date active membership is created or the date the worker receives their enrolment information [5]. A worker who opts out within that window is treated as never having joined, and the employer must refund any contributions already deducted within one month of receiving a valid notice [11].
An employer must not encourage or induce a worker to opt out, which is an offence, and the opt-out notice itself must come from the pension scheme rather than the employer [2] [5]. A worker who leaves after the window closes stops future contributions but is not automatically entitled to a refund of what has already been paid in [11].
How contributions show on a payslip
A worker should be able to see their pension contribution on their payslip, and the way it appears depends on the tax-relief method the scheme uses [6]. Getting the display right is part of the employer's payslip duty.
What the payslip must show
Payslips must be issued on or before payday and must show variable deductions, including the worker's pension contribution [6] [7]. Under a net pay arrangement, the figure shown is the full contribution taken before tax; under relief at source, the figure shown is only the worker's net contribution, with the government's tax relief added separately by the provider [8].
Higher-rate and additional-rate taxpayers in a relief-at-source scheme receive only basic-rate relief automatically and must claim the balance, usually through self assessment [9]. Producing a compliant, itemised payslip for every pay run is handled directly by an instant payslip generator or by a full UK payroll engine for platforms that embed payroll.
Conclusion
Workplace pension contributions look like a single deduction on a payslip, but they are the visible end of a chain that runs from earnings definition, through the monthly deduction, to a dated payment into the scheme and a specific tax-relief treatment. Each link has its own rule, and each is a point where a manual payroll can fall out of step with the law.
As more of payroll moves inside software, the value of a system that reads the scheme basis, applies the right relief method, meets the remittance deadline and prints the correct payslip line grows accordingly. The employer keeps responsibility for the duty, but the mechanics of getting each contribution right are increasingly the work of the payroll engine underneath.
Frequently asked questions
How much does an employer have to contribute to a workplace pension?
An employer must contribute at least 3% of a worker's qualifying earnings under automatic enrolment, with the worker paying the balance to reach the 8% total [1]. Qualifying earnings for the 2026-27 tax year are the earnings between £6,240 and £50,270. An employer is free to pay more than 3%, and some do so as a benefit, but it can never pay less than the statutory minimum or recover its share from the worker's wages [2].
When do workplace pension contributions have to be paid to the provider?
Contributions deducted in one month must normally reach the pension scheme by the 22nd of the following month when paid electronically [3]. This is the same deadline that applies to PAYE tax and National Insurance. Persistent late payment can be reported to The Pensions Regulator, and an employer that set up its scheme late must backdate and pay the contributions it missed [2].
Do I get my pension contributions back if I opt out?
If a worker opts out within the one-month opt-out window, the employer must refund any contributions already deducted within one month of receiving a valid opt-out notice [5]. The worker is then treated as though they never joined. If the worker stops contributing after the window has closed, future deductions cease but the money already paid in normally stays invested until retirement, subject to the scheme's rules [11].
Why does my pension contribution look different from the amount in my pension pot?
The difference is usually tax relief. Under a relief-at-source scheme, the payslip shows only the worker's net contribution, and the pension provider later adds 20% basic-rate tax relief from HMRC, so the amount landing in the pot is higher than the payslip figure [8]. Under a net pay arrangement the payslip already shows the full gross contribution, so the figures match more closely. Higher-rate taxpayers may be due further relief they have to claim themselves [9].
