Why “Qualifying Earnings” (QE) just became an important term for you to
understand. If you’re not familiar with it, you need to be, because it’s one of
the key criteria around which auto-enrolment is based.
When the legislation was put in place, the employee assessment and
minimum pension contribution level was built around this concept of QE – this
isn’t just the basic pay of an employee but takes into account bonuses,
commissions, maternity pay etc.
What’s confusing is that you don’t have to pay the pension contributions on QE if you don’t want to, you could just pay them on basic pay, but you still have to assess the eligibility of the employees for auto-enrolment on the Qualifying Earnings basis. This could catch you out like this:
An employee earns £729.10 per month, below the auto-enrolment trigger level of £787.
This month she is being paid overtime of £94.22 and bonus of £60.02, both
these amounts are not pensionable.
But as her Qualifying Earnings are £883.34, she is now over the
auto-enrolment trigger and needs to be enrolled – despite her pensionable pay
being less than the trigger level.
Confused? You’re not the only one.
These are real figures from one of our clients who used their payroll
provider to do the assessment and then checked the figures to find out that 30
of their employees who had earned bonuses this month were now eligible, but
wouldn’t have normally been.
Make sure you understand the difference between how to assess your
employees and what pension contributions to pay because they might be
different.
Rob Barksfield
Auto-enrolment Consultant
Telephone: +44 (0)20 7893 3456
Email: contactus@broadstoneltd.co.uk
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