What auto-enrolment pension actually costs an employer (2026/27)

3% of qualifying earnings, not 3% of pay

The minimum employer contribution is 3% of qualifying earnings, and qualifying earnings are the band between £6,240 and £50,270 a year, not the full salary. The total minimum contribution is 8%, of which the employer must fund at least 3% and the employee makes up the rest.

Because the band has a ceiling, the employer cost stops rising at about £1,321 a year however high the salary goes. On £35,000 the employer pays roughly £863; on £80,000 it is still around £1,321. Budgeting 3% of gross salary overstates the cost on high earners and understates nothing.

What this means next to National Insurance

Employer National Insurance behaves the opposite way: it is 15% of everything above £5,000 with no upper limit, so it keeps climbing with salary while the pension cost plateaus. On a £35,000 salary the NI is about £4,500 against roughly £863 of pension, which is why NI, not pension, is what moves a hiring budget.

What the calculator does with it

The calculator applies the qualifying-earnings band rather than a flat percentage, so the pension figure it returns is the statutory minimum for that salary. If your scheme is more generous (many are defined on full pay rather than qualifying earnings), enter your own percentage and the total on-cost will rise accordingly.