If you are an employer with a Workplace Pension Scheme in place you may be wondering what are Qualified Earnings for pension purposes.

Qualified Earnings band £5,876 and £45,000 a year

As an employer you are required to make a pension contribution into your employees retirement pot, currently 1% of qualified earnings, as well as deduct an amount from your employees salary, also 1% of qualified at the moment.**

The employers and employees 1% pension contributions are only made when an employee earns between £5,876 and £45,000.  So if you have a member of staff earning £20,000, then qualified earnings for pension contribution purposes will be based on £14,124 for the employer and employee (£20,000-£5,876).

It is common for employees to be earning commissions, bonus’ or benefits so the following items should be included when calculating qualified earnings:

  • their salary or wages;
  • overtime;
  • bonuses;
  • benefits such as car payments;
  • commission;
  • statutory sick pay;
  • statutory pay someone receives during paternity, maternity or any other kind of family leave;
  • adoption pay;
  • holiday pay.

**Contribution rates in place until 6 April 2018.  Subsequent rates are currently planned to increase as follows:

Contribution rates Employer Contribution Worker’s Contribution
Before 06 Apr 2018 1.0 % 1.0 %
From 06 Apr 2018 2.0 % 3.0 %
From 06 Apr 2019 3.0 % 5.0 %