Pension Auto-Enrolment — What Trade Employers Must Do When They Take On Staff (2026)

The Legal Duty in Plain English

Auto-enrolment was rolled out across the UK between 2012 and 2018 and now applies to every employer from day one of employing staff. The core obligation is simple: you must automatically enrol any "eligible jobholder" into a qualifying workplace pension, deduct their contribution through payroll, and add your own employer contribution on top. You also have to tell every member of staff in writing what you've done and what their rights are.

This is enforced by The Pensions Regulator (TPR), a separate body from HMRC. Crucially, the duty is triggered by employing people, not by company size. There is no "too small to bother" threshold. If you take on a single employee or apprentice and they meet the criteria below, you have legal duties — and TPR will write to you about them.

Who Counts as an Eligible Jobholder?

Not every worker has to be auto-enrolled, and the contribution rules differ by category. Staff fall into three groups based on their age and earnings. The thresholds below are the 2026 figures — they can and do change each tax year, so always check the current numbers before you assess your team.

• Eligible jobholders — aged 22 up to State Pension age and earning over £10,000 a year (the earnings trigger). You must automatically enrol these workers and make contributions.
• Non-eligible jobholders — either aged 16–21 or State Pension age to 74 and earning over £10,000, OR aged 16–74 earning between the lower earnings limit and £10,000. You do not have to auto-enrol them, but they have the right to opt in, and if they do you must contribute.
• Entitled workers — aged 16–74 earning below the lower earnings limit. They can ask to join a scheme, but you are not legally required to pay employer contributions for them.

For most growing trade firms the people you'll be auto-enrolling are full-time tradespeople and apprentices over 22 earning above £10,000. A part-time labourer or a young apprentice on lower hours may fall into the non-eligible or entitled categories — but you still have to assess them and write to them. Remember: even one qualifying employee or apprentice triggers your duties.

How Much You Have to Pay — the Minimum Contributions

The legal minimum total contribution is 8% of an employee's qualifying earnings. Of that 8%, at least 3% must come from you, the employer. The remaining 5% comes from the employee — made up of a 4% deduction from their pay plus 1% in the form of tax relief from the government.

• Employer contribution: 3% minimum
• Employee contribution: 4% (deducted through payroll)
• Government tax relief: 1%
• Total: 8% of qualifying earnings

"Qualifying earnings" is a defined band — broadly earnings between a lower and upper limit — rather than the whole salary, so the cash amount is usually a little less than 8% of gross pay. Some employers choose to contribute on full salary or pay more than 3% as a recruitment and retention perk; in a tight labour market for skilled trades, a more generous employer contribution can help you keep good people. These are minimums, not targets — and like the thresholds, they can change, so confirm the current rates each year.

Choosing a Pension Scheme

You must use a qualifying scheme that meets auto-enrolment standards. You don't have to find one yourself from scratch — there are master trust schemes set up specifically to make this easy and cheap for small employers.

• NEST (National Employment Savings Trust) — the government-backed scheme set up for exactly this purpose. It has a public service obligation to accept any employer, so it's the default choice for many small trade businesses and is free for the employer to use.
• The People's Pension — a large, well-established master trust popular with SMEs.
• Smart Pension — a digital-first provider with straightforward payroll integration.

For a first-time employer, NEST is usually the path of least resistance. Whichever you choose, check how it integrates with your payroll software — the less manual data entry, the fewer mistakes and missed payments. Many providers connect directly to common payroll packages so contributions are calculated and submitted automatically each pay run.

The Practical Steps — What You Actually Do

Once you employ staff, your duties run in a clear sequence. Most of this happens through your payroll, which is why getting payroll set up properly from day one matters so much.

• Assess your staff — work out which category each person falls into based on age and earnings, on their first pay date and on an ongoing basis.
• Write to your staff — every worker must receive a letter explaining how auto-enrolment affects them and what their rights are. This is a legal requirement, not optional.
• Enrol eligible jobholders — put them into your chosen scheme.
• Deduct and pay contributions — take the employee's contribution through payroll and pay it, plus your employer share, to the scheme by the deadline each month.
• Complete your Declaration of Compliance — tell The Pensions Regulator what you've done. This must be submitted within 5 months of your duties starting. Missing it is one of the most common reasons small employers get fined.

The Right to Opt Out

Staff who are auto-enrolled have the legal right to opt out. If they opt out within the one-month opt-out window, any contributions already taken are refunded. After that window they can still stop contributing, but it's treated as ceasing membership rather than a refund.

One rule is absolutely critical here: you must never encourage or induce staff to opt out. Offering an employee a higher wage in exchange for opting out, or pressuring an apprentice to decline the pension, is illegal and is one of the things TPR actively investigates. The opt-out must be the worker's own free choice, made by contacting the pension provider directly — not something you arrange for them.

Re-Enrolment Every Three Years

Auto-enrolment isn't a one-and-done task. Roughly every three years you must carry out re-enrolment: you put eligible staff who had previously opted out (or stopped contributing) back into the scheme. They can of course opt out again, but the duty is on you to re-enrol them and to complete a re-declaration of compliance with TPR.

This is easy to forget because it falls outside the normal payroll rhythm. Put your re-enrolment date in your diary the moment your duties start, and again every three years, so it doesn't catch you out.

Record-Keeping and Payroll

You must keep records of how you've met your duties — who you assessed, what you told them, contributions paid, opt-out notices and enrolment dates — generally for at least six years (opt-out notices for four). TPR can ask to see these at any time.

In practice, auto-enrolment runs through your payroll software and pension provider together. Good payroll handles the assessment, deductions, contribution calculations and submissions each pay run, and keeps the audit trail for you. If you're still running payroll on a spreadsheet, taking on staff is the point to move to proper software — the cost of getting auto-enrolment wrong far exceeds the cost of a payroll package.

Penalties for Getting It Wrong

The Pensions Regulator has real enforcement teeth. If you ignore your duties, the typical escalation is a warning letter, then a fixed penalty notice of £400, and if you still don't comply, escalating daily penalties that scale with the number of staff you employ — these can run into hundreds of pounds a day for a small firm and far more for larger ones.

TPR also pursues unpaid contributions and can take action against employers who try to dodge the rules — including those who pressure staff to opt out. The regulator publishes its enforcement actions, so there's a reputational hit on top of the financial one. The simple message for any trade business hiring its first employee or apprentice: treat auto-enrolment as a non-negotiable part of becoming an employer, not an admin job to put off.

Quick Reference: Worker Categories and Your Duty (2026)

Thresholds, earnings limits and contribution rates are reviewed each tax year and can change. Always confirm the current figures with The Pensions Regulator or your payroll provider before assessing staff.