Earnings basis

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 4 definitions:

  • Qualifying earnings: worked out using total pay but only between the £6,240 and £50,270 thresholds (2023/24). Minimum contributions – Employer: 3% | Total: 8%. Here’s how to calculate contributions using the thresholds.
  • Set 1: pensionable earnings (basic): worked out using at least basic pay*. Contributions from first £1 earned – no thresholds. Minimum contributions – Employer: 4% | Total: 9%. Must certify at least every 18 months.
  • Set 2: pensionable earnings (85%): worked out using at least basic pay. When combining all employees using this set (including all employees you’re certifying for), the average basic pay must always make up at least 85% of the average total pay^. Contributions from first £1 earned – no thresholds. Must certify at least every 18 months. Minimum contributions – Employer: 3% | Total: 8%.
  • Set 3: total earnings: worked out using everything that an employee is paid. Basic pay, plus all other earnings. Contributions from first £1 earned – no thresholds. Must certify at least every 18 months. Minimum contributions – Employer: 3% | Total: 7%.

*What is basic pay? Includes all earnings in an employee’s basic salary. It also includes statutory sick pay statutory sick pay, statutory maternity pay, ordinary or additional statutory paternity pay, and statutory adoption pay.

^What is total pay? Includes basic pay, and any commission, bonuses, overtime. This list is not exhaustive, and employers may include other types of pay.

For more information, visit The Pensions Regulator’s website.