What is a worker's pay reference period for the purposes of pensions auto-enrolment?
The employer needs to use a worker's pay reference period to assess their earnings for pensions auto-enrolment. In this context, the employer can choose how to define a worker's pay reference period, from two options. Under option one, the pay reference period is:
- one week, in the case of a worker who is paid their regular wage or salary by reference to a period of a week; or
- in the case of a worker who is paid their regular wage or salary by reference to a period longer than a week, whichever period by reference to which the worker is paid.
For example, the pay reference period for a worker who is paid monthly will be one month.
The second option for defining the pay reference period was introduced to overcome certain practical difficulties, including alligning pay reference periods with those used for PAYE and national insurance purposes and accommodating certain variable pay patterns. Under option two, the pay reference period is a period equal in length to the usual interval between payments of the worker's regular wage or salary; or one week, whichever is the longer. If this definition is adopted by the employer, the pay reference period begins at the beginning of the relevant tax period, for example the start of the tax week or tax month, depending on the frequency of payment.