Auto Enrolment Pension UK: Employer Guide to Workplace Pensions (2026)

Every UK employer, no matter how small, must provide a workplace pension and automatically enrol eligible employees. The rules have been in force since 2012, but many small businesses still struggle with the details. This guide explains who qualifies, what you must contribute, how opt-outs work, and what happens if you get it wrong.

What is auto enrolment?

Auto enrolment is the legal requirement for employers to set up a workplace pension scheme and enrol eligible employees into it. The employer must make contributions alongside the employee's own contributions. The aim is to ensure that everyone who works builds up pension savings for retirement.

It applies to all employers with at least one employee. There are no exemptions based on company size, sector, or turnover.

Who must be enrolled?

Employees fall into three categories based on their age and earnings:

Eligible jobholders (must be enrolled automatically)

Aged between 22 and state pension age
Earning more than £10,000 per year (the earnings trigger)
Working in the UK

These employees must be enrolled from their first day of employment, or from the day they meet the age and earnings criteria.

Non-eligible jobholders (can opt in)

Aged 16 to 74
Earning between £6,240 and £10,000 per year

These workers are not automatically enrolled but have the right to opt in. If they do, the employer must contribute.

Entitled workers (can join, but no employer contribution required)

Aged 16 to 74
Earning less than £6,240 per year

These workers can ask to join the pension scheme, but the employer is not required to make contributions.

Contribution rates

The minimum contributions are calculated on qualifying earnings, which is the band of earnings between £6,240 and £50,270 per year (2025/26 figures, adjusted annually):

Employer minimum: 3% of qualifying earnings
Employee minimum: 5% of qualifying earnings (including tax relief)
Total minimum: 8% of qualifying earnings

Many employers choose to contribute more than the minimum to attract and retain staff. Some use a "salary sacrifice" arrangement, which reduces both employer and employee National Insurance costs.

How opt-out works

Employees have the right to opt out of the pension scheme within one month of being enrolled. If they opt out within this window, any contributions already deducted are refunded and it is treated as though they were never enrolled.

Important rules around opt-outs:

You must not encourage or incentivise employees to opt out
You cannot make opting out a condition of employment
Employees who opt out must be re-enrolled approximately every 3 years (on the re-enrolment date you choose)
Employees can choose to opt back in at any time, and you must process this within one month

Choosing a pension provider

You need a qualifying pension scheme. The most popular options for small businesses are:

NEST (National Employment Savings Trust): Government-backed, accepts all employers, no set-up fees. Charges 1.8% on contributions plus 0.3% annual management charge.
NOW: Pensions: No set-up fee, no contribution charge. Flat 0.3% annual management charge.
The People's Pension: No set-up fee, 0.5% annual management charge. Simple administration.
Smart Pension: Modern platform with payroll integration. Competitive charges.

When choosing a provider, consider the charges, the ease of administration, integration with your payroll software, and the investment options available to employees.

Your ongoing duties

Auto enrolment is not a one-off task. Your ongoing obligations include:

Assess new employees: Check each new starter against the eligibility criteria
Process contributions: Deduct and pay contributions with every payroll run
Monitor earnings changes: An employee who crosses the £10,000 threshold must be enrolled
Re-enrol opt-outs: Every 3 years, re-enrol anyone who previously opted out
Keep records: Maintain records of enrolment, opt-outs, and contributions for 6 years
Submit a declaration of compliance: Complete this with The Pensions Regulator within 5 months of your duties start date

Penalties for non-compliance

The Pensions Regulator enforces auto enrolment and can issue:

Fixed penalty notice: £400 for failing to comply after a warning
Escalating penalty notice: £50 per day (1 to 4 employees), £500 per day (5 to 49 employees), £2,500 per day (50 to 249 employees), or £10,000 per day (250+ employees)
Criminal prosecution: In serious cases, directors can face criminal charges

How Leavely helps with pension tracking

Leavely helps you keep pension-related employee data organised:

Employee profiles: Store pension enrolment dates, opt-out dates, and provider details against each employee record.
Start date tracking: Automatic tracking of employment start dates helps you identify when new starters need to be enrolled.
Document storage: Attach pension correspondence and opt-out forms to employee profiles.
Onboarding checklists: Include pension enrolment as a step in your onboarding workflow so it is never missed.