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PeopleXD Evo
Payroll and Pensions: The HR Team's Guide to Auto Enrolment and Pension Integration
For HR and payroll teams managing large workforces, payroll and pensions is an always on process. Auto enrolment requires workforce assessment on every payroll run, ongoing opt-out management, a three-year re-enrolment cycle, and accurate data flowing between HR, payroll, and pension provider systems at all times.
The Pensions Regulator has used enforcement powers in over 500,000 cases in the last decade, with fixed penalty notices starting at £400 and escalating to daily fines of up to £10,000 for large employers.
The challenge most HR teams face is not understanding what auto enrolment requires. It is managing it accurately when HR, payroll, and pension administration sit in separate, disconnected systems.
This guide covers who qualifies for auto enrolment, the 2026/27 thresholds and contribution rates, re-enrolment obligations, the risks of disconnected systems, and what the current legislative landscape means for HR teams preparing for the year ahead.
What is auto-enrolment?
Auto enrolment is the legal requirement for all UK employers to automatically enrol eligible workers into a qualifying workplace pension scheme and make minimum contributions on their behalf. It applies to every employer in the UK, regardless of size.
The duty is not a one-off setup. Employers must assess their workforce on every payroll run to identify workers who have newly become eligible, whether because they have turned 22, crossed the earnings trigger, or moved from part-time to full-time hours. Missing an eligibility trigger mid-employment is one of the most common sources of non-compliance in large organisations.
There are three categories of worker under auto enrolment legislation, each with different rights and employer obligations.
Who qualifies as an eligible jobholder?
An eligible jobholder is a worker who:
- Is aged between 22 and State Pension age (currently 66, rising to 67 between 2026 and 2028)
- Earns at least £10,000 per year (the earnings trigger)
- Normally works in the UK
Eligible jobholders must be automatically enrolled. The employer has no discretion to exclude them, and the worker cannot be required to opt out as a condition of employment.
Who is a non-eligible jobholder?
A non-eligible jobholder is a worker who:
- Is aged 16 to 21, or State Pension age to 74, and earns above £10,000 per year
- Or is aged 16 to 74 and earns between £6,240 and £10,000 per year
Non-eligible jobholders have the right to opt in to the pension scheme. If they choose to do so, the employer must make contributions on their behalf.
Who is an entitled worker?
An entitled worker is aged 16 to 74 and earns below £6,240 per year. They have the right to join a workplace pension scheme, but the employer is not required to make contributions on their behalf.
Auto-enrolment thresholds and contribution rates: what HR teams need to know
For 2026/27, all auto enrolment thresholds have been maintained at their 2025/26 levels, confirmed by the Department for Work and Pensions in December 2025.
|
Threshold |
Annual |
Monthly |
Weekly |
|
Earnings trigger |
£10,000 |
£833 |
£192 |
|
Lower earnings limit (LEL) |
£6,240 |
£520 |
£120 |
|
Upper earnings limit (UEL) |
£50,270 |
£4,189 |
£967 |
Source: The Pensions Regulator
Thresholds are reviewed annually and can change each April. HR teams should verify the current figures at the start of each tax year rather than assuming they remain unchanged.
Minimum contribution rates are fixed at a total of 8% of qualifying earnings: at least 3% from the employer and 5% from the employee (including tax relief). These rates have been in place since April 2019.
Contributions are calculated on the band of earnings between the LEL and the UEL, not on total salary.
How do variable pay and bonuses affect pension contributions?
Bonuses, commission, and overtime are all included in qualifying earnings calculations. This creates a specific compliance risk in large organisations with variable pay structures: a worker who earns below the earnings trigger on their base salary may cross it in a pay period where a bonus or overtime payment is included. When that happens, an enrolment obligation is triggered, and payroll must catch it in real time on that pay run.
What is re-enrolment and when does it apply?
Every three years, employers must re-enrol eligible workers who have previously opted out and submit a re-declaration of compliance to The Pensions Regulator within five months of the re-enrolment date. It is a legal duty, not a discretionary review, and failure to submit the re-declaration triggers a fixed penalty notice of £400.
The process involves five steps:
- Choose a re-enrolment date within the six-month window around the third anniversary of the employer's staging date
- Assess all workers who have previously opted out or ceased active membership
- Re-enrol all eligible workers into the qualifying pension scheme
- Issue statutory communications to affected workers within six weeks of the re-enrolment date
- Submit the re-declaration of compliance to TPR within five months of the re-enrolment date
For large employers running multiple payrolls across different pay frequencies, a single re-enrolment date must still be selected. Without integrated systems, tracking eligibility across weekly, fortnightly, and monthly pay cycles simultaneously relies on manual cross-referencing between the pension provider, HR system, and payroll.
Payroll software with automated re-enrolment assessment removes that dependency: eligibility is assessed against live HR data, communications are triggered on schedule, and the re-declaration deadline is tracked within the system.
Why does pension and HR integration matter?
Most large organisations manage payroll, HR, and pension administration across separate systems. Each system holds a version of the employee record: the HRIS holds contract and salary data, the payroll system holds pay and deduction history, and the pension provider holds enrolment, contribution, and opt-out records. When these systems do not share data automatically, the gaps between them become compliance risks.
If you are weighing up the broader question of whether a standalone or integrated HR system is right for your organisation, our guide to standalone vs integrated HR software covers the decision in full.
Pension and HR integration is the connection of HR, payroll, and pension provider systems so that employee data, eligibility assessments, and contribution submissions flow automatically between them, without manual intervention at each step.
What are the risks of disconnected payroll and pension systems?
Leon Foster Hill, Senior HR Business Partner at Cineworld, described the situation before moving to an integrated platform: "We had no audit trails, no single source of the truth and no robust security." For large employers managing pension obligations across multiple payrolls, that is not an unusual starting point. The specific risks include:
- Salary changes not reflected in pension contribution calculations because the update did not transfer between systems before the pay run
- New starters missed from auto enrolment assessment because HR onboarding data has not reached the payroll system in time
- Opt-out requests processed in one system but not updated in another, leading to continued pension deductions after a valid opt-out
- Re-enrolment eligibility not tracked accurately because HR and payroll systems hold different records of opt-out history
- Manual data exports to pension providers introducing transcription errors that result in incorrect contribution amounts
- Inadequate audit records because enrolment, contribution, and opt-out history is spread across multiple systems with no single source of truth
What does good pension and HR integration look like?
Esther Osborn FCIPD, Head of People Operations and Services at Wilmington Plc, put it plainly: "Anyone that has worked with multiple systems or even excel sheets will know how difficult it is to maintain 'one version of the truth' but having the ability to pull through data from the one existing accurate source is invaluable."
A well-integrated payroll and pension system operates from exactly that: a single employee record that is the source of truth for both HR and payroll. Any change to salary, contract type, or working hours updates automatically across both systems, with no manual transfer required.
Simon Tully, Digital and Technology Services Director at COOK, described the decision to integrate simply: "We did not want the IT team and the people team wasting their time trying to get two systems to talk to each other, so we chose the integrated Payroll and HR functions that Access People offers."
In practice, this means:
- Automated eligibility assessment on every payroll run, drawing directly from live HR data rather than a manually maintained list
- Automated contribution calculations that update in real time when variable pay, bonuses, or overtime are added to a pay run
- Direct data submission to the pension provider after each payroll run, with no manual export or import step
- A complete audit trail recording every enrolment, opt-out, contribution, and statutory communication in a single system accessible to both HR and payroll teams
- Re-enrolment tracking built into the payroll cycle, with automated eligibility assessment and deadline management
The strongest platforms also support local compliance requirements: HMRC reporting, pension auto enrolment, statutory leave calculations, and UK GDPR compliance, all within the same data environment rather than across separate tools that each require their own maintenance.
What should HR teams ask when evaluating payroll and pension software?
When reviewing payroll and pension software, HR teams should ask:
- Does the system assess auto enrolment eligibility automatically on every payroll run, or does it require manual intervention?
- Is pension data submitted directly to the pension provider from within the platform, or does it require a manual export and upload?
- How does the system handle workers with variable pay who may cross the earnings trigger in a single pay period?
- Can the system manage re-enrolment tracking and re-declaration submission, or does that require a separate process outside the platform?
- Is there a single audit trail for all enrolment, contribution, and opt-out records, accessible to both HR and payroll teams?
- What happens when legislation changes? How quickly can the system be updated, and who is responsible for ensuring compliance?
For organisations managing HR, payroll, and pensions across multiple systems, a single integrated platform will typically reduce overall cost. The saving comes not only from licensing consolidation, but from the staff time spent reconciling data between systems and correcting errors that integration would have prevented.
If you are still weighing the options, our guide to in-house payroll vs outsourcing covers the decision in detail for organisations with 500 or more employees.
How does pension and HR integration support compliance in 2026 and beyond?
Five legislative changes are affecting payroll and pension obligations in 2026/27. Each one increases the operational dependency between HR, payroll, and pension systems, and each one raises the cost of managing them in isolation.
|
Change |
Status |
What it means for HR and payroll |
|
SSP from day one |
In force (Employment Rights Act 2025) |
Payroll must calculate SSP from the first day of illness for all eligible workers. Systems must have been updated. |
|
Fair Work Agency |
Operational from April 2026 |
Proactive inspection powers mean employers must be able to demonstrate compliance through records, without waiting for a worker complaint. |
|
Pension Schemes Act 2026 |
Royal Assent 29 April 2026 |
Introduces automatic consolidation of small dormant DC pension pots. Review pension provider relationships and data submission processes. |
|
Mandatory payrolling of Benefits in Kind |
Delayed to April 2027 |
Preparation is advisable now. Requires payroll software capable of handling benefit values alongside standard pay processing. |
|
Pensions (Extension of Auto Enrolment) Act 2023 |
Implementation date not yet set |
Powers to lower enrolment age to 18 and remove the lower earnings limit. Model the workforce and cost impact before the date is confirmed. |
For a detailed look at how large organisations manage these obligations across complex payroll structures, read our guide to enterprise payroll compliance.
How PeopleXD Evo payroll supports compliant payroll and pension management
Auto enrolment compliance is complex and ongoing. Re-enrolment adds a three-yearly cycle of assessment, communication, and re-declaration. The Employment Rights Act 2025, the Fair Work Agency, the Pension Schemes Act 2026, and the forthcoming Pensions Extension Act changes all increase the operational demands on HR and payroll teams, and all of them increase the cost of managing payroll and pensions across disconnected systems.
PeopleXD Evo Payroll is built for medium to large organisations with 500 or more employees. It is fully integrated with Access end-to-end HR software, connecting HR data, payroll processing, and pension provider submissions so that eligibility assessment, contribution calculations, and re-enrolment tracking all run from a single employee record. For organisations that prefer a fully managed approach, Access Payroll Services (APS) provides outsourced payroll management with the same integration and compliance capability.
For HR teams managing large, complex workforces, that level of integration is the operational foundation of a compliant payroll and pensions function.
Frequently Asked Questions
What is auto enrolment?
Auto enrolment is the legal requirement for all UK employers to automatically enrol eligible workers into a qualifying workplace pension scheme and make minimum contributions on their behalf.
Who qualifies for auto enrolment in 2026?
Workers aged between 22 and State Pension age who earn at least £10,000 per year and normally work in the UK must be automatically enrolled.
What are the auto enrolment thresholds for 2026/27?
The earnings trigger is £10,000, the lower earnings limit is £6,240, and the upper earnings limit is £50,270. All thresholds are unchanged from 2025/26.
What are the minimum pension contribution rates?
The minimum total contribution is 8% of qualifying earnings: at least 3% from the employer and 5% from the employee, including tax relief. These rates have been fixed since April 2019.
What is pension and HR integration?
Pension and HR integration is the connection of HR, payroll, and pension provider systems so that employee data, eligibility assessments, and contribution submissions flow automatically between them, without manual intervention at each step.
Why does pension and HR integration matter for compliance?
Disconnected systems create data gaps that lead to missed enrolments, incorrect contribution calculations, and inadequate records. Each of these exposes employers to TPR enforcement action and, under the Fair Work Agency's proactive inspection powers, to compliance findings without a worker complaint being required.
What happens if an employer fails to comply with auto enrolment?
The Pensions Regulator can issue a fixed penalty notice of £400, escalating to daily fines of up to £10,000 for large employers. Backdated contributions covering the full period of non-compliance must also be paid.
What is re-enrolment?
Every three years, employers must re-enrol eligible workers who have previously opted out and submit a re-declaration of compliance to The Pensions Regulator within five months of the re-enrolment date.
Is the auto enrolment age changing?
The Pensions (Extension of Automatic Enrolment) Act 2023 gives the Secretary of State the power to lower the auto enrolment age to 18 and remove the lower earnings limit. As of July 2026, the government has not yet set an implementation date.
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