Auto-enrolment pension costs 2026/27: 3% minimum, qualifying earnings £6,240–£50,270

Written by EmployerCalculator Editorial · Reviewed against official UK sources · Last updated: April 2026

Employer auto-enrolment costs explained: minimum 3% on qualifying earnings £6,240–£50,270. A £30k salary costs ~£716/yr; a £50k salary costs ~£1,321/yr. Full breakdown with enrolment rules.

Minimum contribution framework

For workplace pensions, the minimum total contribution is 8% of qualifying earnings, with at least 3% paid by the employer. The remaining 5% comes from the employee's own pay plus tax relief. Qualifying earnings are bounded by lower and upper limits set each April.

The employer element is not a simple percentage of full gross salary. It is calculated on the slice of salary that falls within the qualifying earnings band, unless the pension scheme uses a more generous certification basis. That means a £20,000 salary and a £50,000 salary do not attract proportionally equal pension costs.

In budgeting, pension should always be modelled alongside employer NI because both scale with pay and together move total employer cost materially above the headline salary figure.

Qualifying earnings in practice

For 2026/27, qualifying earnings run from £6,240 to £50,270 per year. Earnings below the lower threshold are excluded from minimum contribution calculations — so a worker on £12,000 per year has pension calculated on £5,760 (£12,000 minus £6,240), not on the full £12,000.

For higher earners above £50,270, only earnings up to the upper limit are included for statutory minimum modelling. An employer contributing the legal minimum on a £70,000 salary pays 3% of £44,030 (£50,270 minus £6,240) — roughly £1,321 per year — not 3% of £70,000. Employers can choose to contribute on full salary as a company policy, but that is a voluntary enhancement above the statutory floor.

Understanding the qualifying earnings band logic matters because it avoids over-estimating pension cost for lower salaries and under-estimating it for mid-range ones. The full employer calculator models this band correctly for any salary you enter.

Enrolment eligibility and timing

Eligible workers are those aged 22 to State Pension Age earning above £10,000 per year from a single employer. They must be enrolled automatically within six weeks of their start date. Workers aged 16–21 or above State Pension Age, or earning between £6,240 and £10,000, have the right to opt into a pension scheme but cannot be enrolled without requesting it.

Employees can opt out within one calendar month of being enrolled. If they do, their contributions are refunded and yours stop. Crucially, employers must re-enrol eligible workers every three years regardless of previous opt-outs — this is a legal duty, not a choice.

Keep records of enrolment dates, opt-out requests and re-enrolment cycles. The Pensions Regulator carries out compliance checks and the fine for failure to re-enrol can run into thousands of pounds per day for larger employers.

Budgeting and communication

Set a standard pension assumption in all hiring plans and make exceptions explicit. Using different pension bases across departments — some on qualifying earnings, some on full salary — makes role cost comparisons misleading. Standardise the basis and note it alongside salary when presenting headcount budgets.

Where you offer above-minimum employer contributions — common at 5% or 10% — publish the policy clearly so managers can explain total package value accurately in job offers. Higher pension contributions are a genuine differentiator in hiring but only when candidates understand them.

Reconcile pension cost forecasts to payroll monthly, especially where salary changes, new starters, opt-outs or opt-ins happen during the year. Pension cost is easy to under-budget mid-year if it is only modelled at the point of hire.

Frequently asked questions

How much does it cost to employ someone in the UK?

The true cost to employ someone in the UK is typically 15–20% above gross salary. At £30,000: employer NI £3,750 + pension £713 = approximately £34,463 per year. At £50,000: employer NI £6,750 + pension £1,313 = approximately £58,063 per year. Adding workplace overheads of £2,000–£5,000 can bring the total to 20–25% above the headline salary.

What is the employer NI rate for 2026/27?

For 2026/27, employer Class 1 National Insurance is charged at 15% on employee earnings above the secondary threshold of £5,000 per year (£96 per week, £416 per month). This rate increased from 13.8% in April 2025, when the threshold was simultaneously cut from £9,100 to £5,000. Both changes apply from 6 April 2025.

How much employer NI do I pay on a £35,000 salary?

At £35,000 salary, employer NI for 2026/27 is £4,500 per year — 15% on £30,000 of earnings above the £5,000 threshold. That is £375 per month. In 2024/25, the same salary produced £3,585 in employer NI. The April 2025 changes therefore add £915 per year on this salary alone.

What is Employment Allowance and who can claim it?

Employment Allowance lets eligible employers reduce their annual employer NI bill by up to £10,500 in 2026/27, increased from £5,000 in 2024/25. The previous £100,000 NI bill eligibility cap has been removed, so more businesses qualify. Companies where the only paid employee is also a director cannot claim. Apply through payroll software via the Employer Payment Summary indicator.

What is the total employer cost above salary?

Beyond salary, employer cost includes: employer NI (15% on earnings above £5,000), employer pension (minimum 3% of qualifying earnings between £6,240 and £50,270), and overheads such as equipment, software and workspace. For most UK salaries this adds 12–20% above headline pay. Use the inputs above to set your exact pension rate and overhead figure.

What changed for employers in April 2025?

Three changes took effect from 6 April 2025: the employer NI rate rose from 13.8% to 15%, the secondary threshold was cut from £9,100 to £5,000, and Employment Allowance increased from £5,000 to £10,500 with the eligibility cap removed. For a £30,000 salary, annual employer NI increased from approximately £2,884 to £3,750 — a rise of £866 per year.

How is employer NI different from employee NI?

Employer NI is a cost paid by the employer on top of gross salary — it does not reduce take-home pay. Employee NI is deducted from the employee's wages instead. For 2026/27, employees pay 8% on earnings between £12,570 and £50,270, then 2% above that. Employers pay 15% on all earnings above £5,000 with no upper cap. This calculator covers the employer side; for employee take-home pay see AfterTaxSalary.co.uk.

What are employer costs in the UK?

UK employer costs in 2026/27 are: gross salary, employer NI at 15% on earnings above £5,000, employer pension at minimum 3% of qualifying earnings (£6,240–£50,270), and any operational overheads such as equipment or software. For a £35,000 salary, statutory employer costs (NI + pension) add approximately £5,363/year before overheads.

How much do I cost my employer in the UK?

If you earn £35,000, you cost your employer roughly £40,363/year — your salary plus £4,500 employer NI and £863 minimum pension. At £50,000, the total is approximately £58,063. Your employer pays these on top of your salary; they are not deducted from your pay. Use this calculator to see the exact figure for your salary.

Is this a PAYE cost calculator for employers?

Yes. PAYE employer costs include employer NI — calculated at 15% above £5,000 for 2026/27 — plus the employer's auto-enrolment pension contribution. The full calculator models both alongside any overhead assumptions to give a total PAYE-basis employer spend per employee.

What is a cost to company (CTC) salary in the UK?

Cost to company (CTC) in the UK refers to the total annual cost of an employee to their employer — salary, employer NI, pension, and overheads combined. A £35,000 CTC salary typically means a gross salary of roughly £30,000–£32,000 once the employer's NI and pension obligations are included in the total. Use this calculator to work backwards from a CTC budget to a gross salary.

Once you know the cost — what next?

Running payroll correctly after you have calculated employer cost is the next practical step. The tools below handle HMRC RTI submissions, auto-enrolment pension and payslip generation automatically.

Compare UK payroll software → Open employer cost calculator Check Employment Allowance eligibility

EmployerCalculator Editorial. Content reviewed against HMRC guidance. Estimates only — not financial or legal advice. See our methodology and sources.