What's auto-enrolment going to cost my business?

Auto-enrolment is a must-do, and yes, it will be a cost to your business. This could be significant - so you do need to understand and budget for it. Here's our handy guide to what you need to know and what you need to plan for.

There are two kinds of costs:

  1. Contributions that you'll need to pay into your employees' pension pots.
  2. Overheads you'll pay to setup and manage your qualifying workplace pension scheme


Contributions are the payments that you and each employee make into the employee’s pension. It's how each pension pot is built up.

  • There are minimum contribution levels that have been set by the Pensions Regulator.
  • There’s a minimum total contribution and a minimum employer contribution. But there’s no minimum employee contribution level within annual allowance levels.
  • You can choose to set a higher contribution level if you want – see below for an example of this.
  • Contribution levels vary depending on the payment type used, but minimum contribution levels for each payment type are the same for all pension providers.

See below for examples and illustrations of how contributions work in practice.

Minimum contributions - an example

Company X – they have already staged.

The current total minimum contribution level is 3% and the minimum employer contribution level is 2%. But Company X have chosen to pay a higher level of 3%.


  • Staff benefit - this saves their employees having to start making contributions when the idea of a pension is still new for them.
  • Being prepared - to be geared up to meet minimum employer payments in April 2018, when the first increase happens.

From 6 April 2018, at the first increase in payments, their employees will begin paying in 3%. That brings the total contributions to the minimum 6%.

From 6 April 2019, combined contributions will have to reach a minimum of 9% - with the employer paying at least 4%.

How are contributions worked out?

There are a couple of different ways of working out contributions based on earnings. This means you might see different numbers, depending on different providers. Here’s why.

Comparing earning types

There are several types of earnings, each with differing contribution levels and complexities.

Payment method Now - 5 April 2018 6 April 2018 - 5 April 2019 6 April 2019 onwards
Basic pay 3% 6% 9%
Qualifying earnings 2% 5% 8%
Total earnings 2% 5% 7%


Basic Pay - bases contributions on pay before any additions such as bonuses or overtime.

Qualifying earnings - includes a variety of things like salary, commission, bonuses, sick or maternity pay – these tend to vary every month.

Total earnings - contributions are worked out based on full earnings before tax. So these must include all inclusions and deductions (such as overtime, etc).

We use "basic pay" to calculate contributions and here’s why

With the basic pay payment type, calculating the amount you have to pay each time tends to be much simpler, because basic pay tends to be stable.

  • Easy - it’s simple to define and to work out contribution amounts
  • Consistent - it tends to be stable – so less chance of employees falling in and out of eligibility
  • Time-saving - you won’t have to recalculate contributions every time tax bands are changed

Other payment types may use a slightly lower contribution level, but the additional work could be a major headache – and a time-thief too. We think that the simplicity offered by using basic pay is well worth it.

2. Fees

We charge you £100 per month. We’ll put our hand up – we know we’re a bit more expensive than some other providers out there but we believe that in terms of value for money it’s well worth it.

Our summary of auto-enrolment costs and contributions

  • Contributions are made up of a minimum employer contribution and a minimum total amount
  • And increases to 9% from 6 April 2019 onwards
  • You can choose to pay more than the minimum
  • You will pay the same minimum contributions for all providers using the same payment type - they don't differ
  • There are a number of ways to contribute based on how you define your pay
  • We use basic pay as our contribution basis because it is easier to define, is more stable and simpler to calculate
  • We believe the best outcomes for your employees should be a key consideration when choosing a workplace pension

What's next?

Your ongoing duties

There are some things you’ll need to do on an ongoing basis once you’ve set up your scheme and got your employees enrolled. You’ll get the full details of this once you’re set up, but so that you can plan ahead we’ll summarise everything.

Ready to set up a scheme?

If you want to see how much your scheme is likely to cost you can get a quote right now. Just fill out the first part of the form and take a look at your personalised report.

Navigate through the key parts of auto-enrolment