Assessment and pension calculation earnings

There are two distinct things we need to think about: Assessment & Pension Calculation

Assessment

To assess the employee we use the earnings trigger for automatic enrolment – This is based on the qualifying earnings elements. This is made up of pay elements like salary, hourly Pay, overtime, commission, bonus, statutory payments etc.

Once the employee has been assessed then that trigger is no longer used.

As a rule of thumb, items subject to National Insurance are classed as qualifying earnings. Please ensure you check your with your pension provider.

Pension Calculation

Once the employee is in the Pension scheme the pension calculation can be based on a number of items.

Some pension providers use the term Qualifying Earnings, some use Banded earnings.
This is pension deducted between the lower level and upper level of qualifying earnings. This is again made up of elements like Salary, Hourly Pay, Overtime, Commission, Bonus, Statutory Payments etc.

Some pension contracts allows you to specify the items used for calculation of pension, if this is the case then we still have to use the qualifying earnings elements to assess the employee but the items used for the actual pension calculation are dependent on the contact agreed with the pension provider.

For example the actual pension deduction may be based on basic pay only. This is referred to in the Auto Enrollment Configuration Tool as Pensionable Earnings. There is no threshold and is based on the whole £1 of the item selected