The two options on which to base your contributions levels for pension auto-enrolment

Following on from our 'key points' article on pensions auto-enrolment, we've set out the two options you can base your pension contributions on. For more information, or to discuss your business, you can speak to Joanne Turner, Wards Solicitors.

1. Qualifying earnings

• Minimum contributions will be based on an earnings band of more than £5564 and £42,475 or less, called qualifying earnings.
• Qualifying earnings includes salary, wages, overtime, bonuses, commissions, statutory sick pay, statutory maternity pay, ordinary/additional statutory paternity pay and statutory adoption pay.
• Employers must check that their minimum contributions are made, any difference is deducted from employees, and the total is paid to the pension provider each time a contribution is due.

2. Certificated earnings

• As an alternative to using the qualifying earnings definition, employers may choose to certify that their scheme meets the minimum requirements.
• Minimum contributions will be based on the employer's definition of 'pensionable salary'.
• Pensionable salary must be at least basic contractual salary and need not include variable salary, such as bonuses, overtime and commission.
• Contributions must be based on the first pound of pensionable salary.
• Employers may certify in advance that their scheme will meet the quality requirement for up to twelve months.
• Employers may designate the calculations to an authorised person (eg. adviser, accountant etc) but remain responsible for the certification itself.