How UK startups can streamline People's Pension contributions

Running a startup comes with enough plates to spin. Pensions shouldn’t be one of them. Yes, pension compliance is a legal requirement. But it doesn’t need to be a faff.

From the moment you hire your first employee, you’re responsible for setting up a workplace pension and making contributions if they’re eligible. Employees earning over £833/month are automatically enrolled. Those earning between £520 and £833/month can opt in. And if they do, there’s a requirement for you to contribute.

For a lot of early-stage businesses, The People’s Pension is the go-to scheme. It’s simple, widely used, and ticks all the boxes with The Pensions Regulator.

In this article, we explain what The People’s Pension is, what pension rules UK startups need to follow, and why manual processes can create issues. We walk through what a streamlined pension workflow looks like, then show how Rippling automates the whole lot.

All information in this article is accurate as of May 2025 and reflects the 2025/26 tax year. Pension rules, contribution thresholds, and regulatory requirements may change. Always refer to the latest guidance from The Pensions Regulator.

What is The People’s Pension?

The People’s Pension is one of the UK’s most popular workplace pension schemes. It has up to 6.9 million members and 100,000+ employers on board. It’s run by a not-for-profit provider, and it’s designed to be simple, low-cost, and accessible for businesses of all sizes. This includes startups.

It ticks every box when it comes to auto-enrolment compliance and is backed by The Pensions Regulator (TPR). That’s why so many small employers choose it. You don’t need to jump through hoops to get started, and the ongoing fees are fair.

The scheme also offers a choice of investment options. It has a default fund designed to grow steadily over time while reducing risk as employees get closer to retirement. It’s a set-and-forget setup for most workers, but there’s flexibility if they want to get more involved.

What UK startups need to know about pension rules

Workplace pensions are a legal requirement. If you’ve got even one eligible employee on payroll, there are rules you need to follow:

Legal auto-enrolment requirements

Auto-enrolment means you’ve got to automatically enrol eligible employees into a workplace pension scheme. It’s the law. You don't ask them if they want to join. You’ve got to enrol them. Then they can opt out if they choose.

Eligibility criteria

Not every employee has to be auto-enrolled. They need to be at least 22 years of age, under State Pension age, and earning over £10,000 a year (£833 a month). If they meet all those criteria, you’ve got to enrol them. Other workers, like younger staff or those earning less, can still join if they want to. But you won’t always need to contribute.

Minimum contribution rates

Right now, the minimum contribution is 8% of qualifying earnings. You’ve got to pay at least 3% as the employer. The rest usually comes out of the employee’s wages. If you want to contribute more than the minimum, you can. But 3% is the legal minimum.

Employee opt-out process

Even though auto-enrolment is mandatory, employees still have the right to opt out. They’ve got a one-month window to do this after being enrolled. If they do, you’ll need to refund any contributions taken during that period. After the one-month opt-out window, employees can still leave the scheme. But they won’t get a refund. Their contributions stay in the pension fund.

Important: Employers are also required to re-enrol any eligible employees who’ve opted out every three years. This is a legal obligation, even if the employee previously declined to participate. You’ll need to assess them again and re-enrol them if they meet the criteria.

Submissions and record keeping

Every pay run, you’ve got to submit updated contribution data to your pension provider. You also need to keep records showing when employees were assessed, enrolled, opted out, or re-enrolled. TPR can ask to see this. So, make sure your records are up to scratch.

Penalties for non-compliance

If you don’t meet your pension duties, TPR can fine you. They may issue fixed penalties of £400, and daily fines of £50 to £10,000 depending on your headcount. They take missed or late contributions rather seriously. So, it's worth getting right from the start.

Why pension contributions are a headache for startups

Sorting out pensions might not sound like a big job. But for startups, it quickly becomes a time-sink. Especially if you’re doing it all manually or relying on patchy payroll tools. Here’s why:

• Pension duties kick in as soon as you hire your first employee: You don’t get a grace period. The moment someone joins your payroll (and hits the earnings threshold), there's a legal requirement for you to enrol them and pay contributions. It can catch founders off guard.
• Manual setup is time-consuming and repetitive: Entering employee details, checking eligibility, calculating contributions, and then doing it all again every pay run? It’s repetitive and boring at best, and error-prone at worst.
• Most payroll tools rely on third-party middleware: Lots of payroll software doesn’t connect directly to The People’s Pension. Instead, you export a file, upload it to a separate platform, and cross your fingers it all lines up. It’s clunky and fiddly.
• Mistakes are easy to make and hard to fix: If you enrol someone too late, miss a submission, or pay the wrong amount, it’s not always a quick fix. And if TPR gets involved, it can mean fines and paperwork you don’t want to deal with.
• Time spent on pensions is time not spent growing your business: Every hour you spend battling with spreadsheets is an hour you’re not building your product, hiring your team, or talking to customers. For early-stage startups, that trade-off matters.

What a streamlined pension workflow looks like

Pension compliance doesn’t have to be a never-ending admin slog. With the right payroll and HR software, a lot of the legwork can be done for you. Here’s what a smooth setup looks like in practice:

Automatically assess eligibility and trigger enrolment

As soon as someone joins the team, your system should check whether they meet the legal criteria for auto-enrolment. That means looking at their age and earnings (and doing it every single pay period, not just once).

Modern payroll software can do this in the background. So, if someone hits the threshold part-way through the year, they’ll be enrolled automatically. No need for you to keep an eye on everyone’s earnings manually.

Calculate and submit contributions each pay run

Once someone’s enrolled, you’ve got to take the right amount from their wages and top it up with your own contribution. It has got to be accurate. And it’s got to be reported to your pension provider every pay run.

A good payroll system handles this automatically. It works out the figures, applies the rules, and submits the data to The People’s Pension without you having to export or upload anything. It all just 'happens' when you run payroll.

Send employee communications automatically

The law says employees need to be told what’s happening with their pension. This includes notifying them when they’re enrolled, how much is going in, and what their options are.

Rather than faffing about with templated letters or forgetting to send them altogether, your system should take care of this too. The right software will generate and send out the correct comms, so every employee knows where they stand.

Keep an audit trail for compliance

TPR can request your records at any time, especially if there’s ever a complaint or missed contribution. You’ll need to prove who was assessed, when they were enrolled, who opted out, and what contributions were made.

Trying to patch that together from old spreadsheets and inboxes can be a nightmare. But if you’ve got a proper digital trail built into your system, you can pull it all up in seconds.

Automating People’s Pension contributions with Rippling

When running a business, the last thing you want is to waste time jumping between systems, uploading CSVs, or second-guessing whether your pension submissions have gone through. Rippling takes that hassle off your plate.

Rippling integrates directly with The People’s Pension. Minus the middleware and spreadsheets. From auto-enrolment to contribution submissions, it handles everything. And it does it all in the background while you focus on running your business.

Here’s what Rippling takes care of:

• Auto-enrolment assessments: Every pay run, Rippling checks if someone qualifies for auto-enrolment. And it kicks things off if they do.
• Contribution calculations: It automatically works out what’s owed by you and your employee. Then it deducts the right amount from each payslip.
• Submissions and employee opt-ins: It sends contributions straight to The People’s Pension. And if employees want to opt in, opt out, or change contribution levels, it handles that too.
• Compliance tracking: Rippling logs every action, builds your audit trail, and keeps you aligned with TPR’s requirements.

It doesn’t matter if you’ve got one employee or fifty. Rippling scales with you, without adding admin overhead.

Better still, Rippling isn’t just payroll software. It’s an all-in-one workforce management platform that brings together your HR, payroll, IT, and finance. Everything’s connected and built on a single source of truth. When someone gets a pay rise or changes roles? That update flows automatically through to their payslip, pension, and tax records. No double-handling, and no room for error.

Running payroll and managing pensions shouldn’t feel like a full-time job. With Rippling, it doesn’t.

People’s Pension contribution FAQs

What is the minimum contribution to the People's Pension?

For the 2025/26 tax year, the minimum total contribution under auto-enrolment rules is 8% of an employee's qualifying earnings. This comprises at least 3% from the employer and the remaining 5% from the employee, which includes tax relief. ​

Qualifying earnings are those between £6,240 and £50,270 annually (£520 to £4,189 monthly).

Is employer pension contribution compulsory in the UK?

Yes. There's a legal requirement for employers to contribute a minimum of 3% of an eligible employee's qualifying earnings into a workplace pension scheme. This obligation applies to employees aged between 22 and the State Pension age (66) who earn over £10,000 annually.

What is the maximum pension contribution in the UK?

There’s no upper limit on how much can go into an employee’s pension pot. But there's a limit on how much they (and you) can contribute each year without triggering a tax charge.

For the 2025/26 tax year, the Annual Allowance is £60,000. That covers everything: employee contributions, employer contributions, and any tax relief added. Go over that amount, and the employee may face a tax charge on the excess.

For high earners, the allowance can taper down to as little as £10,000, depending on their income. When an employee earns over £260,000 (adjusted income), the Annual Allowance starts to reduce.

As the employer, you don’t need to monitor your staff’s Annual Allowance. But it’s worth knowing the rules. This is especially true if you’re offering matched or enhanced contributions. Some employees may also be able to use carry forward. This allows them to contribute more by using unused allowance from the past three tax years.

Does payroll software handle UK pension contributions?

Some modern payroll software can automate pension contributions by:​

• Assessing employee eligibility for auto-enrolment.
• Calculating both employer and employee contributions.
• Submitting contributions directly to pension providers
• Managing employee communications and maintaining compliance records

For instance, Rippling integrates directly with The People’s Pension. It streamlines the entire process without the need for third-party tools or manual uploads.

How to calculate employer pension contributions?

To calculate the employer's pension contribution:​

1. Determine the employee's qualifying earnings (between £6,240 and £50,270 annually).
2. Calculate 3% of these qualifying earnings.​

For example, if an employee earns £30,000 annually:​

• Qualifying earnings = £30,000 - £6,240 = £23,760​
• Employer contribution = 3% of £23,760 = £712.80 annually

Note: This calculation is based on qualifying earnings. Some pension schemes may use different methods, such as total earnings, for calculating contributions. Always refer to your specific scheme's rules.

This blog is based on information available to Rippling as of May 13, 2025.

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.