Qualifying earnings

Qualifying earnings answer two pension questions

Qualifying earnings are used first to assess a worker's automatic-enrolment category. They can also provide the basis for minimum contributions in a defined contribution scheme. Those two uses are connected, but they are not the same calculation.

The earnings definition includes specified kinds of pay due in the relevant pay reference period, such as salary or wages, commission, bonuses, overtime and certain statutory payments. Only the portion inside the statutory band for that period is qualifying earnings. The Pensions Regulator's assessment guidance explains the detailed pay-period test. Use the published figures that apply to the period rather than copying a band from an older example.

Do not substitute basic pay or take-home pay

Qualifying earnings are not simply basic salary, gross pay or net pay. A bonus or statutory payment may count even when it is not part of basic salary. Tax, National Insurance and other deductions do not turn gross qualifying earnings into a take-home-pay test.

Check which amounts are payable in the period, not only what the worker usually earns in a year. This matters for irregular pay, starters, leavers and one-off payments. A worker's category can change when earnings move across a current threshold.

Check the scheme's contribution basis separately

Some schemes calculate contributions on qualifying earnings. Others use another pensionable-pay definition and meet the statutory quality test through their rules or certification. The scheme guidance distinguishes the statutory minimum test from the pay basis a scheme actually uses.

For each scheme, record both answers: the qualifying earnings used for the worker assessment and the pensionable earnings used for contributions. Payroll should not have to infer one from the other.