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As an employer, you are legally obligated to establish pension schemes once you employ staff. Once you establish a scheme, you must contribute a portion of your employees’ wages to the scheme. Additionally, you may make further contributions towards your workplace pension schemes. However, if you do so, the contributions must be in specific amounts, and at particular times. Otherwise, the Pensions Regulator (TPR) could issue you a fine. This article will explain what you, as an employer, need to know about how to pay pension contributions in England.
What is a Workplace Pension Scheme?
A workplace pension scheme allows your business to contribute toward your eligible employees’ pensions. Pension schemes enable your employee to save for retirement by placing a percentage of their pay into the scheme, alongside additional employer contributions.
How Much is Paid Into a Workplace Pension Scheme?
Your employees are enrolled on your workplace pension scheme because they meet the eligibility criteria. The scheme comprises regular contributions you and your employees will make. Nevertheless, the amounts paid depend on:
- the scheme rules of the type of workplace pension scheme you run; and
- whether your employee has been automatically enrolled or voluntarily joined your workplace pension scheme (or ‘opted in’).
Pensions scheme contributions are usually either:
- a fixed amount; or
- an amount based on a percentage of your employee’s earnings.
If you are paying according to a percentage of your employee’s earnings, you will need to:
- decide if anything above the legal requirements counts as their earnings or not, such as bonus pay; and
- let your pension provider know the figure for each employee’s total earnings.
Where your employee has opted into your workplace pension scheme, you only have to make your employee’s contribution unless they earn at least the minimum amount. If they earn this amount, you must make contributions. This is:
- £520 per month; or
- £120 per week; or
- £480 over a four-weekly period.
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When Should an Employer Pay Pension Contributions?
You must pay your pension contributions at the right time as an employer. This includes both:
- in terms of deducting the contribution from their salary; and
- contributing to the workplace pension scheme.
Therefore, you will need to factor in any time before the date to calculate and deduct the contribution from their salary. Additionally, you will need to agree on the pension contribution date with your scheme provider or trustee.
Any contributions you pay as the employer into your workplace pension are not subject to specific payment dates. Instead, you can agree on a particular date with your provider and make it easier to pay for your contribution at the same time as your employee pays for theirs.
What Records Are Required for Pension Contributions?
In addition to the records you need to keep as part of managing your workplace pension scheme, you must keep records for six years relating to the contributions made to the workplace pension scheme. These records are essential if a future dispute arises between you and your workplace pension scheme provider.
The records you need to maintain include:
- your employee’s gross earnings;
- contributions you or your employees are due to pay; and
- any additional contributions you or your employees paid if these differ from the above.
Key Takeaways
The rules surrounding workplace pension contributions are specific and strict. Hence, getting these wrong can amount to a fine in terms of improper payment or wrong payment date. Nevertheless, you must know that rules differ depending on your workplace pension scheme and whether your employees have been automatically enrolled or opted into the scheme.
If you need help understanding how to pay pension contributions in England, our experienced employment lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. So call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
A workplace pension scheme is a scheme you must set up in your business from the moment you start employing staff. It allows you to enrol and pay contributions towards eligible staffs’ pensions.
As an employer, you must contribute to the workplace pension scheme on your employees’ behalf. Additionally, you may also be required to make further contributions.
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