Once the employee is in the Pension scheme the pension calculation can be based on several items – Some pension providers use the term Qualifying Earnings, some use Banded earnings – This is pension deducted between the lower level and upper level of qualifying earnings. This is again made up of elements like Salary, Hourly Pay, Overtime, Commission, Bonus, Statutory Payments etc.
Some pension contracts allow you to specify the items used for calculation of pension, if this is the case then we still must use the qualifying earnings elements to assess the employee, but the items used for the actual pension calculation are dependent on the contact agreed with the pension provider. For example, the actual pension deduction may be based on basic pay only. This is referred to in the Auto Enrolment Configuration Tool as Pensionable Earnings. There is no threshold and is based on the whole £1 of the item selected.
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