What auto-enrolment actually costs a domiciliary care agency
The employer cost is 3 percent of each eligible carer's qualifying earnings, and for most agencies that lands between £400 and £600 a year per full-time carer. Qualifying earnings are the band between £6,240 and £50,270 for 2026/27, so you do not pay on the first £6,240 a carer earns. Take a carer on £22,000: their qualifying earnings are £15,760, the employer 3 percent is £472.80, and the carer contributes 5 percent on top, most of it their own money with a slice of tax relief. Total going into the pot is 8 percent of the band.
Scale that and the number gets real. Twenty-five carers on roughly £22,000 is about £11,800 a year of employer contributions. Fifty carers is nearer £23,600. It sits on your wage bill alongside the £12.71 National Minimum Wage, employer National Insurance at 15 percent above the £5,000 threshold, and holiday pay. Workplace pensions are the smallest of those on-costs per hour, but they are a fixed line you cannot design away, and they rise every time you take a carer off zero pay onto steady hours.
This guide is written by LOYALS, a King's Cross firm of accountants and business consultants that runs weekly payroll, pension auto-enrolment and council invoicing for London home care agencies. We build the pension number into the wage models we prepare for clients, because an owner who forecasts a cost of care rate without it is quietly under-pricing every hour. If you want the wider picture of what an hour actually costs to deliver, our care agency accountants page and our payroll and PAYE service both start from the same build-up.
The Pensions Regulator (TPR) is the body that enforces all of this, and its published earnings thresholds for employers confirm the £6,240 to £50,270 band and the £10,000 trigger for 2026/27. The Department for Work and Pensions reviewed those figures in December 2025 and held them at the 2025/26 levels, so nothing moves this year.
Which carers you must enrol, and which you can leave
You assess every worker every pay period against three categories, and the category decides the duty. This matters in care because a single agency often runs full-time carers, bank staff, weekend-only staff and students side by side, and they do not all get treated the same.
An eligible jobholder is aged 22 to State Pension age and earns above the £10,000 trigger in the pay period being assessed. You must enrol them and pay the employer contribution. A carer on 30 or more hours a week is almost always here. A non-eligible jobholder is either aged 16 to 21 or State Pension age to 74 and earning over £10,000, or any age earning between £6,240 and £10,000. You do not have to enrol them, but if they ask to opt in you must let them, and you pay the 3 percent once they earn above £6,240. An entitled worker earns below £6,240. They can join a scheme but you are not required to contribute.
The trap in care is the part-timer who drifts over the line. A weekend carer picking up extra shifts through a bad winter can cross £10,000 in a single busy month, become an eligible jobholder for that period, and trigger an enrolment duty the owner never saw coming. Assessment on every run, not once a year, is the only way to catch it. GOV.UK sets out the categories in its workplace pensions guidance for employees, and the assessment logic is what good payroll software runs automatically each period.
Why churn is the real problem, not the 3 percent
The 3 percent is easy. The turnover is what turns pensions into a monthly headache for a care agency. Domiciliary care runs some of the highest staff turnover of any sector, and every joiner, leaver and rehire is a fresh assessment, a possible postponement notice, an enrolment, an opt-out window and sometimes a refund. Miss one and the error compounds quietly across the payroll until The Pensions Regulator or a new accountant finds it.
Here is the lifecycle for a single carer, and you are running dozens of these at once. It starts the day they join and does not truly end until they leave, because the three-year re-enrolment loop pulls opted-out staff back in.
Opt-outs are their own trap. A carer who opts out within one month of enrolment gets a full refund of their contribution, and you have to process it and adjust the payroll. Opt out later and they stay in until the next stoppage point. Carers opt out more than most sectors because take-home pay matters week to week on care wages, so a busy agency processes opt-outs constantly, and each one has to be handled on time or the money is stuck. For the interaction with variable hours, our guide to holiday pay for zero-hours and variable-hours carers covers the same payroll discipline from the leave side.
Does travel time count towards pension contributions?
Yes, pay for travel time between calls is earnings, so it counts towards both the £10,000 trigger and the qualifying earnings the 3 percent is worked out on. This catches agencies out because travel time is often calculated late, bolted onto the payroll after the visit hours are done, or paid at a different line. If it is not in the pensionable pay figure, your contributions are understated and the underpayment builds quietly.
The same pay that has to clear the £12.71 National Minimum Wage across all working time, including travel between clients, is the pay that feeds the pension. HMRC treats travel between appointments as working time for minimum wage, set out in its guidance on calculating the minimum wage, and that same principle means it is earnings for auto-enrolment. Get the travel-time figure right once and both problems are solved together. We wrote the mechanics up in detail in domiciliary care mileage and travel time, and the minimum-wage side in the averaging trap for domiciliary carers.
There is a knock-on point on cost of care. The Homecare Association sets a minimum price for homecare each year, which for 2026/27 works through to around £34.42 an hour once travel, training, pension, National Insurance and a small surplus are stacked on the £12.71 wage. Councils frequently pay less, which is where the margin pressure comes from. If your fee model treats pensions as a rounding error, you are absorbing that gap yourself.
Re-enrolment every three years, and the re-declaration
Every three years you must put eligible carers who opted out back into the pension, then tell The Pensions Regulator you have done it. This is the duty owners forget, because the day-to-day feels finished once everyone is assessed and the opt-outs are processed. Re-enrolment resets that. You pick a re-enrolment date within a six-month window around your third anniversary, re-enrol anyone eligible who is not currently in, and they get a fresh chance to opt out again.
Then comes the re-declaration of compliance. You have to complete it within five months of the third anniversary of your original staging or duties start date, even if you had no one to re-enrol. Missing the re-declaration is a common trigger for a TPR compliance notice, and it is entirely avoidable, because it is a diary date. The Pensions Regulator explains the cycle in its re-enrolment and re-declaration guidance. In a care agency with steady churn, the opted-out list at re-enrolment is usually longer than the owner expects.
What is changing: the 2023 Act, age 18 and the first pound
The biggest change to auto-enrolment is legislated but not yet switched on, and for care it is significant. The Pensions (Extension of Automatic Enrolment) Act 2023 gives the government power to lower the enrolment age from 22 to 18 and to remove the £6,240 lower qualifying earnings limit, so contributions would run from the first pound of earnings rather than only the band above £6,240. It received Royal Assent in September 2023.
As at September 2026 there is no commencement date. The Department for Work and Pensions said it would consult on implementation and timing, and until regulations are laid nothing changes. You can see the powers in the Act itself on legislation.gov.uk. When it does land, a care agency feels it more than most employers, because the workforce skews younger and part-time. Enrolling from age 18 brings in more of your carers, and contributing from the first pound raises the cost on every one of them. It is worth modelling now so it is not a surprise later.
For everything already in force this year, the numbers are steady: the £10,000 trigger and the £6,240 to £50,270 band hold for 2026/27, the employer minimum stays 3 percent, and the total minimum stays 8 percent. That stability is useful for budgeting, and it is the base you plan the coming change against. Your pension cost is just one line in the monthly pack, and we set out the rest in our guide on what monthly management accounts should show a care agency owner.
Here is how the three common approaches actually compare for running pensions across a churning care team:
| What a care agency needs | DIY payroll | Generic accountant | LOYALS specialist |
|---|---|---|---|
| Assesses every carer each pay run for eligibility | ● If software set up | ● Often monthly only | ✓ Every run |
| Applies postponement to short-stay starters | ✗ Usually missed | ● If asked | ✓ By default |
| Includes travel-time pay in qualifying earnings | ✗ | ✗ Care blind spot | ✓ Built in |
| Processes opt-out refunds inside the window | ✗ Easy to miss | ● | ✓ Tracked weekly |
| Runs three-year re-enrolment and re-declaration | ✗ | ● If diarised | ✓ Owned for you |
| Open Mon to Sat for urgent payroll questions | ✗ | ✗ Mon to Fri 9 to 5 | ✓ 10am to 7pm Mon to Sat |
This is why domiciliary care owners with more than a handful of carers tend to move payroll to a specialist rather than carry the pension admin themselves.
Run a care agency? If you would rather this ran quietly in the background, our care agency accountants handle payroll, auto-enrolment, opt-outs and council invoicing as an outsourced finance department from £995 a month.
What this means for you: getting pensions right without the admin
Most of the risk here is process, not policy, so the fixes are practical and quick to put in place.
- Assess on every pay run, not once a year. Set your payroll software to categorise every carer each period so a part-timer crossing £10,000 is caught the moment it happens.
- Decide your postponement policy and stick to it. If you use the up-to-three-month postponement on new starters, send the notice within six weeks every time. A policy you apply inconsistently is worse than none.
- Get travel time into pensionable pay. Confirm your payroll includes travel-time pay in qualifying earnings, so contributions and minimum wage are both right from the same figure.
- Diary the opt-out windows. Track each enrolment's one-month opt-out window so refunds go out on time and the money is not stuck.
- Put re-enrolment and re-declaration in the calendar. Note your three-year date now and the five-month re-declaration deadline, whether or not you expect anyone to re-enrol.
- Model the 2023 Act change. Run a version of your cost of care rate with age-18 enrolment and contributions from the first pound, so the reform is a number you already know when it commences.
None of this is complicated on its own. It is the volume and the timing across a churning team that catches owners out, which is exactly the kind of recurring, deadline-driven work a specialist care payroll runs for you. If you would like LOYALS, a King's Cross firm that runs weekly payroll and pension auto-enrolment for London home care agencies, to check your setup, a 15-minute call is the fastest way to find out where you stand.