Every UK employer must automatically enrol eligible workers into a qualifying workplace pension scheme and make minimum employer contributions. From April 2019, the minimum is 3% employer plus 5% employee (8% total, based on qualifying earnings). Employers who fail to comply face Pensions Regulator fines starting at £400 for a fixed penalty notice and escalating to £10,000 per day for ongoing non-compliance. There are no exemptions for small businesses.
What is auto-enrolment?
Auto-enrolment is the UK pension system that requires employers to enrol eligible workers into a workplace pension scheme automatically — without the worker needing to apply. Workers can opt out, but they must be re-enrolled every 3 years.
Auto-enrolment was introduced in 2012 and phased in by employer size. By 2018, all employers had duties. If you have any employees at all — including one — you have auto-enrolment duties.
Who do you need to enrol?
| Category | Age | Earnings (annual) | Action | |---|---|---|---| | Eligible jobholder | 22 to State Pension age | Over £10,000 | Must auto-enrol | | Non-eligible jobholder | 16 to 21 or State Pension age to 74 | Over £10,000 | Can opt in on request | | Non-eligible jobholder | 22 to State Pension age | £6,240 to £10,000 | Can opt in on request | | Entitled worker | 16 to 74 | Under £6,240 | Can join (no employer contribution required) |
"Earnings" here means qualifying earnings — pay between the lower and upper thresholds set each tax year. For 2025/26, qualifying earnings are between £6,240 and £50,270.
Contribution rates (2026)
Minimum contributions must be based on the worker's qualifying earnings:
| Contributor | Minimum rate | |---|---| | Employer | 3% of qualifying earnings | | Employee | 5% of qualifying earnings | | Total | 8% |
These have been at 8% total since April 2019. The Pensions and Lifetime Savings Association has called for increases in future, but as of 2026 the rates are unchanged.
Example: A worker earns £25,000 per year. Qualifying earnings are £25,000 minus £6,240 = £18,760. Employer contribution: 3% of £18,760 = £562.80 per year (£46.90/month). Employee contribution: 5% of £18,760 = £938 per year (£78.17/month).
Choosing a pension scheme
You must use a qualifying workplace pension scheme. The scheme must be registered with HMRC and meet the Pensions Regulator's quality requirements.
NEST (National Employment Savings Trust) is the government-backed scheme designed for employers who do not have an existing arrangement. NEST has an obligation to accept all employers, charges low fees, and is a straightforward option for small businesses.
Other qualifying providers include The People's Pension, NOW:Pensions, Smart Pension, and many insurance company group schemes.
Do not use a personal pension or stakeholder pension you have set up individually — these do not qualify for auto-enrolment unless they are set up as group schemes.
Your key staging dates and re-enrolment
Staging date: the date from which your auto-enrolment duties began. New employers since October 2017 have duties from the day they first employ a worker.
Re-enrolment: every 3 years from your staging date, you must re-enrol any workers who had previously opted out and are now eligible. They can opt out again, but you must go through the process. This is called your re-enrolment date.
Declaration of compliance: within 5 months of your staging date (and after each re-enrolment), you must complete a declaration of compliance on the Pensions Regulator website.
Workers who opt out
Workers who are auto-enrolled can opt out within one month of being enrolled. If they opt out in time, any contributions already deducted must be refunded.
Workers who opt out must be re-enrolled every 3 years. You cannot encourage or incentivise workers to opt out — doing so is a criminal offence.
Penalties for non-compliance
The Pensions Regulator takes non-compliance seriously. Enforcement actions include:
| Action | Penalty | |---|---| | Fixed penalty notice | £400 | | Escalating penalty notice | £50 to £10,000 per day | | Civil penalty (inducing opt-out) | £1,000 to £5,000 | | Criminal prosecution (wilful non-compliance) | Unlimited fine or imprisonment |
Common causes of compliance failure: late enrolment, not submitting the declaration, incorrect contribution calculations, and using a non-qualifying scheme.
Auto-enrolment checklist for small businesses
- [ ] Identify your staging date or duties start date
- [ ] Assess all workers and categorise them (eligible, non-eligible, entitled)
- [ ] Choose a qualifying pension scheme and register with the provider
- [ ] Write to all workers to tell them about auto-enrolment and what it means for them
- [ ] Enrol eligible jobholders from their duties start date
- [ ] Set up payroll deductions for both employer and employee contributions
- [ ] Process any opt-out requests and refund contributions
- [ ] Submit your declaration of compliance to the Pensions Regulator
- [ ] Diarise your re-enrolment date (3 years from staging)
Keeping auto-enrolment records
The Pensions Regulator requires you to keep records for 6 years (or 4 years for opt-out notices). Records must include:
- Names and National Insurance numbers of enrolled workers
- Dates of enrolment and any opt-outs
- Contribution amounts and dates paid
- Details of the scheme used
KornerIQ stores employee records and key dates — set your re-enrolment date as a reminder so it does not pass unnoticed.
Frequently asked questions
Do I need to auto-enrol my only employee? Yes. Auto-enrolment duties apply to every employer, regardless of how many staff they have. A sole director with no other employees is the only exception — if you are the only employee of your own company, auto-enrolment does not apply.
What if a new employee is under 22 or earns less than £10,000? They are a non-eligible or entitled worker. You do not need to auto-enrol them — but if they ask to join the scheme, you must allow them to do so (and make contributions if they are a non-eligible jobholder earning above the lower earnings limit).
Can I use my existing pension scheme for auto-enrolment? Only if it is a qualifying scheme that meets the Pensions Regulator's standards. Check with your provider. Many personal pensions and older occupational schemes do not qualify without modification.
What happens to auto-enrolment if I pause my business? Auto-enrolment duties continue even if you have no trading income. If you have workers, you have duties. Contact the Pensions Regulator if your circumstances change significantly.
Can I offset my employer pension contributions against employee pay to keep total cost the same? No. You cannot reduce pay in order to offset pension contributions unless the employee expressly agrees to a salary sacrifice arrangement and their pay does not fall below National Minimum Wage as a result.