If you are an employer with a Workplace Pension Scheme in place you may be wondering what are Qualified Earnings for pension purposes.
Qualified Earnings band £5,876 and £45,000 a year
As an employer you are required to make a pension contribution into your employees retirement pot, currently 1% of qualified earnings, as well as deduct an amount from your employees salary, also 1% of qualified at the moment.**
The employers and employees 1% pension contributions are only made when an employee earns between £5,876 and £45,000. So if you have a member of staff earning £20,000, then qualified earnings for pension contribution purposes will be based on £14,124 for the employer and employee (£20,000-£5,876).
It is common for employees to be earning commissions, bonus’ or benefits so the following items should be included when calculating qualified earnings:
- their salary or wages;
- benefits such as car payments;
- statutory sick pay;
- statutory pay someone receives during paternity, maternity or any other kind of family leave;
- adoption pay;
- holiday pay.
**Contribution rates in place until 6 April 2018. Subsequent rates are currently planned to increase as follows:
|Contribution rates||Employer Contribution||Worker’s Contribution|
|Before 06 Apr 2018||1.0 %||1.0 %|
|From 06 Apr 2018||2.0 %||3.0 %|
|From 06 Apr 2019||3.0 %||5.0 %|