What’s an earnings basis?

This describes which basis of the employee’s earnings are used for calculating pension contributions. There are typically three definitions:

Qualifying earnings – is the band of earnings between £6,032 and £46,350 a year (for the 2018/19 tax year) and is made up of the following components of pay: salary, wages, commission, bonuses, overtime, statutory sick pay, statutory maternity pay, ordinary or additional statutory paternity pay and statutory adoption pay.

Pensionable earnings – is the pay on which an employer bases their pension contributions and should include basic pay as a minimum.

Total earnings – includes salary, wages, commission, bonuses, overtime, statutory sick pay, statutory maternity pay, ordinary or additional statutory paternity pay and statutory adoption pay. Other pay components can be included and this list is not exhaustive.

For more on each of the above, refer to The Pensions Regulator.

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