Auto Enrolment Pension Duties for UK Small Employers: A Complete Compliance Guide
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Your Duties Start With Your First Employee
The moment you take on your first member of staff, your auto enrolment duties begin. Not at five employees, not at a certain payroll size. From day one.
That single fact catches out more first-time employers than almost anything else. HMRC handles tax; auto enrolment is enforced by The Pensions Regulator, which issues fixed penalty notices of £400 and escalating daily fines for continued non-compliance.
This guide covers what you actually have to do: assessing your workforce against the current thresholds, who must be enrolled and who can opt in, contribution rates, the declaration of compliance deadline, re-enrolment every three years, and the records you are legally required to keep.
What Triggers Your Duties
There is no small business exemption. Your duties start date is the date your first member of staff begins work, and from that point you must assess every worker, enrol those who qualify into a qualifying scheme, pay contributions and handle the communications.
Employers who existed before the rollout completed had staging dates instead, which ran until early 2018. Anyone taking on their first employee since then has immediate duties from the day that person starts.
The Pensions Regulator will write to you, but the duties begin whether or not the letter has arrived, so do not treat it as your starting gun.
Assessing Your Workforce
Assessment happens per worker and per pay reference period, not once at the start. Someone can move between categories because their hours changed or a bonus pushed them over a threshold in a single month.
The thresholds are reviewed annually by the Department for Work and Pensions. For 2026/27 they were all held at their previous levels, confirmed in the review published in December 2025:
| Threshold | 2026/27 figure | What it decides |
|---|---|---|
| Earnings trigger | £10,000 a year | Whether a worker aged 22 to State Pension age must be enrolled automatically |
| Lower limit of the qualifying earnings band | £6,240 a year | The floor for minimum contribution calculations, and the line above which opt-in rights carry an employer contribution |
| Upper limit of the qualifying earnings band | £50,270 a year | The ceiling for minimum contribution calculations |
These are annual figures and are applied proportionately to weekly or monthly pay periods.
Eligible Jobholders: Must Be Enrolled Automatically
Workers aged 22 to State Pension age, earning above the £10,000 trigger, who work or ordinarily work in the UK. They go into a qualifying scheme without having to ask, and you cannot make enrolment conditional on anything.
Non-Eligible Jobholders: Can Opt In, With Your Contribution
Two groups fall here: those aged 16 to 21, or State Pension age to 74, earning above the trigger; and those aged 22 to State Pension age earning between £6,240 and £10,000.
If one of them asks to join, you must enrol them and you must pay employer contributions. You cannot decline.
Entitled Workers: Can Join, No Employer Contribution Required
Workers aged 16 to 74 earning below £6,240. You must give them access to a scheme if they ask, but you are not required to contribute.
Minimum Contributions
The statutory minimums are 8% in total, of which at least 3% must come from the employer. The remaining 5% comes from the worker, with income tax relief making up part of it in most schemes.
Those percentages apply to qualifying earnings, meaning the slice of pay between £6,240 and £50,270 rather than the whole salary. On a £30,000 salary, qualifying earnings are £23,760, so the 8% minimum is about £1,900 a year rather than £2,400. It is a common misunderstanding, and it matters when you are budgeting or explaining the deduction to staff.
Some employers contribute on a different basis, such as basic pay or total pensionable pay. That is permitted where the scheme meets one of the alternative certification sets, which require higher percentages to compensate for the wider earnings base. If you are unsure which basis your scheme uses, ask the provider rather than guessing, because the two produce noticeably different contribution figures.
Contributions deducted from pay generally have to reach the scheme by the 22nd of the following month where paid electronically, and the 19th otherwise. Late payment is itself reportable.
Choosing a Qualifying Scheme
Not every pension scheme qualifies. Common choices for small employers are NEST, the government-backed scheme that must accept any employer, The People’s Pension, Smart Pension and NOW: Pensions.
The practical question is which one your payroll software connects to directly, because that integration is what turns contribution submissions from a monthly chore into a by-product of running payroll.
The Declaration of Compliance
Once you have assessed your staff, enrolled anyone eligible and set up contributions, you must tell The Pensions Regulator what you did. The deadline is five calendar months from your duties start date. If your first employee started on 1 March, the declaration is due by 31 July.
Two things worth knowing. Missing it can bring a £400 fixed penalty even if everything else was done correctly. And postponing assessment, covered below, does not postpone this deadline. It still runs five months from your duties start date.
Postponement: Up to Three Months
Postponement is the one legitimate way to buy time at the start. You can delay assessing a worker by up to three months from their first day, from your duties start date, or from the date they first meet the age and earnings criteria.
To use it, you must write to the worker within six weeks of the postponement start date to tell them their assessment is being delayed. You cannot postpone beyond three months, and if the worker asks to be enrolled during the postponement period, you must enrol them.
It is most useful for short-term contracts, or for a new employer who needs a few weeks to choose a scheme.
Re-Enrolment and Re-Declaration
Every three years the process repeats. You assess anyone who previously opted out or stopped contributing, re-enrol those who now qualify, and submit a re-declaration of compliance.
You choose your re-enrolment date from a six-month window running three months either side of the third anniversary of your duties start date. The re-declaration is then due within five months of that third anniversary, on the same timetable logic as the first one.
Workers who do not want to stay in must opt out again. It does not carry over from last time. And re-enrolment applies whether you employ two people or two hundred.
Record-Keeping
The Pensions Regulator can ask to see your records, and the retention periods are set in law:
| Record | Retention period |
|---|---|
| Names, addresses and dates of birth of workers assessed | 6 years |
| Enrolment and other statutory communications sent to workers | 6 years |
| Gross qualifying earnings and contributions for each pay reference period | 6 years |
| Dates contributions were paid to the scheme | 6 years |
| Details of the scheme used | 6 years |
| Opt-out notices | 4 years |
Opt-in, joining and opt-out notices must be kept in their original format, because they are the evidence that someone exercised a right. Electronic copies are acceptable as long as they are legible and you can produce them on request.
A spreadsheet can technically hold all of this. The risk is human: missed entries, overwritten cells and no audit trail of who changed what.
How Payroll Software Handles Assessment
This is where payroll software earns its place for a small employer. Manual assessment is not merely slow, it is the single easiest place to make a compliance error, particularly when someone’s hours fluctuate.
Software built for UK payroll will assess every worker on every pay run against the current thresholds, flag status changes when someone crosses the trigger, generate the statutory communications, calculate contributions on the correct earnings basis, submit contribution data to providers such as NEST or The People’s Pension, and keep an audit trail that satisfies the record-keeping duties above.
Xero Payroll, Sage Payroll and Sage 50 Payroll, QuickBooks Payroll and BrightPay all include auto enrolment assessment in the pay run, and BrightPay in particular has a strong reputation among small UK employers for its pension handling. Check what your plan actually includes before assuming, since payroll is sometimes an add-on rather than part of the subscription you already have, and compare list prices rather than introductory offers.
Whatever you pay for payroll at small-employer scale, it is a fraction of a single £400 penalty.
FAQ
Do I need to enrol a director?
It depends on whether there is a contract of employment. A director with one is a worker for these purposes; a director without one generally is not. A sole director with no other staff is outside the duties entirely. Where a company has more than one director and at least two of them have contracts of employment, the duties apply to those individuals. The rules have edges, so check The Pensions Regulator’s guidance for directors if this is your situation.
What happens if an employee opts out?
The opt-out window is one month, running from the later of the date they were enrolled and the date you gave them their enrolment information. If they opt out validly within it, you stop contributions and refund what has been deducted, normally through the next payroll run. Keep the notice for four years, and reassess them at re-enrolment.
You must not encourage or induce anyone to opt out. That is an offence under the Pensions Act 2008 and it is something The Pensions Regulator actively pursues.
Can I use salary sacrifice instead?
Yes, and many employers do, because it reduces National Insurance for both sides. The arrangement still has to meet the auto enrolment minimums, and it cannot reduce pay below the National Minimum Wage.
One change to plan for: from April 2029, only the first £2,000 of employee pension contributions made through salary sacrifice each year will be exempt from National Insurance. Contributions above that will attract both employer and employee NICs, and employers will have to report the amount sacrificed through payroll. Income tax relief is unaffected, and most employees making typical contributions will not be caught, but anyone sacrificing heavily should be running the numbers well before then.
What are the penalties?
A fixed penalty notice of £400 for failing to comply with a statutory notice, followed by escalating penalty notices of between £50 and £10,000 a day depending on how many staff you have. Wilful non-compliance can be prosecuted. The Regulator publishes its enforcement activity, so this is not a theoretical risk.
Auto Enrolment Pension Duties: The Bottom Line
Three things to hold on to. Your duties start with your first employee, not at some later headcount. Assessment is not a one-off: it happens on every pay run, and people move between categories. And the deadlines are unforgiving in a way that the rest of the process is not, particularly the declaration of compliance at five months and the re-declaration three years later.
Confirm your duties start date, choose a scheme, put the declaration deadline in the calendar the same day, and run assessment through payroll software rather than by hand. The Pensions Regulator’s own tools and GOV.UK guidance are genuinely usable if you want to check a specific worker’s category.
This article is general information about UK pensions and employment obligations, not advice, and it does not take account of your circumstances. Thresholds, contribution rules and penalties change, and software plans and prices change more often still. Check the current position with The Pensions Regulator and speak to a qualified accountant, payroll professional or financial adviser before acting on anything here.