Workplace pensions: An employer's complete guide

Published Tuesday 22 September 2026

Table of contents

• What is a workplace pension?
• Do you have to provide a workplace pension?
• Who do you need to enrol?
• How much do you pay into a workplace pension?
• How to set up a workplace pension
• Your ongoing duties as an employer
• How to choose a workplace pension provider
• Simplify workplace pension admin with Xero
• FAQs on workplace pensions for employers

Key takeaways

• Every UK employer must offer a workplace pension and automatically enrol eligible staff under the Pensions Act 2008.
• You must enrol staff aged 22 up to State Pension age who earn more than £10,000 a year and normally work in the UK.
• The minimum total contribution is 8% of qualifying earnings, and you pay at least 3% as the employer.
• Setting up means choosing a scheme, enrolling, and writing to your staff, then completing a declaration of compliance with The Pensions Regulator.

What is a workplace pension?

A workplace pension is a savings scheme you arrange so your staff can build up money for retirement. Payments come in from three places: from you as the employer, from your employee, and from the government as tax relief.

Setting one up isn't optional. Under a system called automatic enrolment (auto-enrolment), you have to put eligible staff into a scheme and pay into it yourself. You might also hear a workplace pension called a company pension or an occupational pension, but they all mean the same thing.

Defined contribution vs defined benefit

There are two main types of scheme, and knowing the difference helps you pick the right one. Most small employers use a defined contribution scheme, so this guide focuses on that.

• Defined contribution: You and your employee pay in, the money is invested, and the final pot depends on contributions and investment growth.
• Defined benefit: The pension pays a set amount at retirement based on salary and years of service, and it's mostly run by larger or public sector organisations.

Do you have to provide a workplace pension?

Yes. Every UK employer must offer a workplace pension for eligible staff. The rules come from the Pensions Act 2008, and they're overseen by The Pensions Regulator.

Your duties begin on your duties start date, which is the day your first member of staff starts working for you. From that date, you're responsible for assessing your staff, enrolling anyone eligible, and paying contributions. You can read the full picture of employer duties on the government’s workplace pensions guidance for employers page.

Staying on the right side of these rules protects your business. If you don't meet your duties, The Pensions Regulator can issue fines, so it pays to set things up correctly from the start.

Who do you need to enrol?

Automatic enrolment applies to a specific group of staff, often called eligible jobholders. You must automatically enrol anyone who meets all three of these conditions.

• aged 22 up to State Pension age
• earning more than £10,000 a year
• normally working in the UK

Staff who fall outside these limits still have rights. Someone who earns less or sits outside the age band can ask to join your scheme, and for some of them you'll still have to pay contributions. Check each person's age and earnings when you run payroll, because their status can change as their pay changes. The Pensions Regulator sets out how to assess your pension duties on its guidance for employers.

How much do you pay into a workplace pension?

The minimum total contribution is 8% of an employee's qualifying earnings. As the employer, you pay at least 3% of that, and the rest (up to 5%) comes from your employee, including the tax relief they get from the government.

Contributions are worked out on a slice of pay called qualifying earnings, which is the number you get when you minus the threshold figure from their salary. For the 2026/27 tax year, the threshold band runs from £6,240 (the lower limit) up to £50,270 (the upper limit). You only pay contributions on your staff’s qualifying earnings, not on someone's whole salary. The point at which someone must be enrolled is the earnings trigger, set at £10,000 a year (£833 a month, or £192 a week).

Here's how the employer's 3% share works in practice. Say you employ someone on £30,000 a year:

• Their qualifying earnings are £30,000 minus £6,240, which is £23,760.
• Your 3% (of £23,760) employer contribution is around £712.80 a year, or roughly £59 a month.

You can choose to pay more than the minimum if you want to offer a stronger benefit, but 3% is the floor you can't go below.

How to set up a workplace pension

Getting a scheme up and running is a clear, five-step process. Work through the steps below in order, and give yourself time before your duties start date so nothing is rushed.

1. Work out your duties start date and who's eligible. Confirm the day your first employee started. Then assess your staff against the age and earnings rules to see who you must enrol.
2. Choose a qualifying pension scheme. Pick a scheme that meets the automatic enrolment standards and works for a business your size.
3. Enrol eligible staff and set up contributions. Add your eligible staff to the scheme and set up their contributions through your payroll, so the right amounts are deducted and paid each pay run.
4. Write to all your staff. Write to everyone on your payroll to explain how automatic enrolment affects them, including their right to opt out. This is a legal step, not just a courtesy.
5. Complete your declaration of compliance. Tell The Pensions Regulator what you've done by completing your declaration of compliance. You normally have five months from your duties start date to finish it.

Your ongoing duties as an employer

Once your scheme is live, a handful of tasks keep it compliant. None of them is complicated, and most fit neatly into your regular payroll routine.

• Pay the correct contributions on time every pay period.
• Keep accurate records of contributions, enrolments, and opt-outs.
• Monitor staff ages and earnings, and enrol anyone who becomes eligible.
• Handle opt-out requests and refund contributions within the opt-out window.

Re-enrolment every three years

Every three years you have to re-enrol eligible staff who previously opted out, then redo your declaration of compliance. This gives people who left the scheme a fresh chance to save, and it's a duty that's easy to diarise so it doesn't catch you out.

How to choose a workplace pension provider

The right provider makes automatic enrolment simple to run and keeps your admin light. A few common schemes are built with smaller employers in mind, including Nest, The People's Pension, and Smart Pension.

When you compare your options, weigh up these practical points:

• Scheme charges: Check the fees your staff pay, since lower charges leave more in their pension pots.
• Payroll integration: Choose a scheme that connects with your payroll so contributions flow through automatically.
• Investment options: Look at the default fund most staff will use, as well as any ethical or alternative choices.
• Member support: Pick a provider that gives your staff clear information and easy access to their pension.

Simplify workplace pension admin with Xero

Once your scheme is chosen, the day-to-day work is really about payroll. Xero payroll calculates each employee's pension contributions, deducts the right amounts, and files the submissions to your provider, which can help you spend less time on manual admin and more time running your business. It works alongside your other payroll and pay run tools, keeping staff pay and pension deductions in one connected place.If you're setting up a scheme for the first time, having software handle the calculations and record keeping takes real pressure off.

Ready to simplify your workplace pension admin? Get one month free.

FAQs on workplace pensions for employers

Here are quick answers to the questions small employers ask most often about running a workplace pension.

Does an employer have to pay into a workplace pension?

Yes, if you employ eligible staff you must pay into their pension, and you can't ask them to cover your share. Your minimum is 3% of their qualifying earnings, which forms part of the 8% total minimum. You can pay more, but never less than 3%.

Can an employee opt out of a workplace pension?

Yes, staff can opt out after you've enrolled them, and if they do so within the opt-out window you must refund any contributions they've made. You still have to enrol them in the first place before they can choose to leave.

What happens if you don't set up a workplace pension?

The Pensions Regulator can issue fixed penalties and escalating daily fines if you miss your duties. Acting on time and completing your declaration of compliance keeps you clear of enforcement.

How often do you re-enrol staff into a workplace pension?

You re-enrol eligible staff who opted out every three years, then complete a fresh declaration of compliance. Putting the date in your calendar makes it a simple, repeatable task.