This describes which of the employee’s earnings are used for calculating pension contributions. You may also see this referred to as ‘Contribution basis’. There are typically 3 definitions:
- Qualifying earnings – earnings between amounts that are set each tax year by the government that have an upper and lower level. Contributions aren’t calculated on anything under the lower level or above the upper level of qualifying earnings. It’s made up of the following pay components: salary, wages, commission, bonuses, overtime, statutory sick pay, statutory maternity pay, ordinary or additional statutory paternity pay, and statutory adoption pay. For more information, visit What are qualifying earnings?
- 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 beyond this list.
For more information, visit The Pensions Regulator’s website