What is Statutory Minimum Contribution (Auto-Enrolment)?

Full Definition

The statutory minimum contribution is the legally required total percentage of a worker's qualifying earnings that must be paid into their workplace pension under automatic enrolment, currently set at 8% in total, of which the employer must contribute at least 3%, with the remaining 5% typically made up of the employee's own contribution combined with basic-rate tax relief added by the pension provider (for a relief-at-source scheme) or by paying gross before tax under a net pay arrangement. An employer can choose to pay more than the 3% statutory minimum -- some pay the full 8% themselves as a recruitment or retention benefit, or match employee contributions above the statutory floor -- but cannot pay less than 3%, and cannot require the employee to make up the shortfall if the employer under-contributes. The 8% total is calculated on qualifying earnings (the band between the lower and upper qualifying earnings limits), unless the employer instead uses one of the permitted certification bases, which calculate contributions from basic pay or total pay from the first pound rather than only on the earnings within the qualifying band, provided the resulting contribution rate is at least broadly equivalent. The statutory minimums were phased in gradually between 2012 and 2019 to give employers and workers time to adjust to the additional cost, reaching the current 8% total from April 2019, and have remained unchanged since, though they are periodically reviewed by the Department for Work and Pensions.

Related Calculators

See Also