Guide

Auto-enrolment pension costs for employers explained

Written by EmployerCalculator Editorial · Reviewed against official UK sources · Last updated: April 2025

How employer pension contributions are calculated and budgeted in UK payroll.

Minimum contribution framework

For workplace pensions, minimum total contribution is 8% of qualifying earnings, with at least 3% paid by the employer. Qualifying earnings are bounded by lower and upper limits.

The employer element is therefore not a simple percentage of full salary in every case. It is calculated against the qualifying earnings band unless a scheme uses a more generous basis.

In budgeting, pension should always be modelled alongside employer NI because both scale with pay and move total cost materially.

Qualifying earnings in practice

For 2025/26, qualifying earnings are between £6,240 and £50,270. Earnings below the lower bound are excluded from minimum contribution calculations.

For higher earners, only earnings up to the upper bound are included for statutory minimum modelling. Employers may choose to contribute on full salary by policy, but that is a separate decision.

Understanding this band logic avoids over-estimating pension cost for low pay and under-estimating for middle incomes.

Budgeting and communication

Set a default pension assumption in hiring plans and make exceptions explicit. This keeps role cost comparisons fair across teams.

Where you offer above-minimum employer rates, publish the policy clearly so managers can explain package value accurately.

Reconcile annual pension forecasts to payroll monthly to catch drift early, especially where salary changes or opt-out rates fluctuate.

Use the calculator

Put the figures from this guide into practice with the live calculator tools below.

Employer NI & total cost calculator Employer cost by salary Employer NI by salary All calculators

Cost — £30,000 salary Cost — £35,000 salary Cost — £50,000 salary Cost — £75,000 salary

Frequently asked questions

What is the employer NI rate for 2025/26?

For 2025/26, the standard employer NI rate is 15% on earnings above the £5,000 secondary threshold.

Does Employment Allowance reduce employer NI?

Yes. Eligible employers can offset up to £10,500 of annual employer NI in 2025/26.

Is this calculator financial or legal advice?

No. It provides estimates only, based on stated assumptions.

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