Auto-Enrolment Pension Duties for Small Employers

The first time you hire someone, pensions can feel like an extra obstacle. But if your new employee is eligible, automatic enrolment is a legal duty, not an option. The rules are clear once you break them down, and the sooner you set up the process, the less stressful it is. Here is what employers need to know in 2026/27 and how to keep on top of it.

Key takeaways

• If you employ eligible staff, you generally must enrol them in a workplace pension and contribute.
• Your duties begin when your first employee starts, not when you reach a certain size.
• You must choose a pension scheme, assess your staff, enrol, pay contributions and report to The Pensions Regulator.
• Contribution levels and thresholds are set by the government, so check the current figures on GOV.UK.

What automatic enrolment is

Automatic enrolment means that, by law, employers must put eligible workers into a workplace pension scheme and pay in a contribution on their behalf. The worker also contributes, normally through deductions from pay, and the scheme may add tax relief. The goal is to make saving for retirement the default rather than something people have to opt into. The official overview is on GOV.UK's workplace pensions for employers page.

Who counts as an eligible worker

Workers are sorted into groups depending on their age and earnings. Some must be enrolled automatically, some can ask to join, and some have the right to join with an employer contribution. The age and earnings thresholds are set by the government and are reviewed, so use the current figures from The Pensions Regulator rather than relying on a number you saw last year. Your payroll software or provider can normally run this assessment for you every pay period.

Your duties step by step

Contributions and cost

The law sets minimum contributions, made up of an employer share and an employee share, and the figures can change. Treat the pension as part of the cost of employing someone, alongside wages, employer National Insurance and any other benefits. Our guide to the true cost of an employee shows how those elements add up. Check the current minimum percentages and the earnings band they apply to on GOV.UK before you budget.

Worked example (illustrative)

"Nadia", an illustrative example, runs a small courier business and hires her first part-time driver. Before the start date she chooses a pension provider, registers with her payroll software and runs the first assessment. The software finds that her new employee is eligible, so she enrols them, sends the required notice, and sets up the contribution each pay run. A few weeks later the employee opts out. Nadia processes the opt-out correctly, refunds any contributions as required and diarises the re-enrolment date, because she knows the duty can return later. Finally she completes the declaration of compliance with The Pensions Regulator. The scenario is invented to show the process and not to suggest specific costs.

Re-enrolment and ongoing admin

Auto-enrolment does not finish after the first enrolment. You must keep assessing staff as their age or pay changes, and periodically re-enrol workers who opted out or left the scheme, within the cycle the Regulator sets. You must also keep records, such as who was enrolled and when, and meet the scheme's deadlines for paying contributions over. A good payroll process automates most of this, which is one of the reasons small employers use a payroll provider rather than doing it by hand. See our payroll service for how that works.

Common mistakes

• Starting too late. Duties begin with your first eligible employee, so set up before the start date.
• Pushing staff to opt out. Employers must not encourage or induce opting out.
• Paying contributions late. Deadlines apply, and late payments can cause problems for you and your staff.
• Forgetting re-enrolment. It repeats on a regular cycle.
• Not declaring compliance. The declaration is a separate step and has its own deadline.

If you are about to take on your first employee, we can help with payroll set-up and pension processing. See our payroll service or contact us to talk through your plans.